China-US trade talks dampen safe-haven demand, causing Japan's 30-year government bond yields to rise to near 25-year highs.

Due to the optimism surrounding the US-China trade negotiations encouraging people to sell off safe-haven assets, the yield on Japan's 30-year government bonds has climbed to its highest level in nearly 25 years. On Monday, the yield on Japan's 30-year government bonds rose by 5 basis points to 2.955%, the highest level since November 2000. Concerns about the demand for Japan's ultra-long-term bonds persist, as the yield had been hovering near its highest level since 2004 even before the US-China trade negotiations. Yields on Japan's ultra-long-term government bonds rise On Monday, both the US and China indicated that there had been "substantial progress" in the trade negotiations. As the negotiations dampened demand for safe-haven assets, US Treasury bonds also experienced a broad decline. As expectations for the Bank of Japan to raise interest rates weaken, short-term Japanese government bonds have performed well, while the yield on Japan's 30-year government bonds has surged against the backdrop of global market volatility and fiscal concerns. Japan's ultra-long-term government bonds have recently attracted record inflows of foreign capital, but most major life insurance companies are reducing their holdings of Japanese bonds. Barclays Securities' Japan strategists Shinichiro Kadota and Ayao Ehara wrote in a report last week: "Market volatility has intensified, and there are concerns about fiscal expansion through defense and stimulative spending, in addition to vulnerabilities in the existing supply-demand structure." Barclays Securities stated, "Since Trump implemented tariffs in April, the yield curve for ultra-long-term bonds has steeply changed." Last week, demand for Japan's 10-year government bonds hit its lowest level since 2021. The market also remained cautious before the sale of Japan's 30-year government bonds on Tuesday.