Intriguing RV Graphs: Lessons from Europe on Super-Long JGB Yields and BoJ Policy

Drawing lessons from historical German Bund and Italian BTP relative value patterns, this report argues that easing BoJ behind-the-curve concerns will not lead to a lasting decline in super-long JGB yields. Yields are expected to remain elevated due to potential fiscal concerns and ongoing uncertainty regarding the BoJ's terminal policy rate.

Key Takeaways

• 1.Super-long government bond yields may decline temporarily when behind-the-curve monetary policy fears subside, but can rebound if asset swap (ASW) spreads widen due to fiscal expansion concerns.
• 2.Super-long yields are unlikely to establish a durable downward trend as long as terminal policy rate uncertainty persists, as seen during the ECB rate-hiking cycle.
• 3.A sustained decline in super-long JGB yields is unlikely for now, given lingering BoJ terminal rate uncertainty and potential Japanese fiscal budget debates later in the year.

Table of Contents

• Key points
• Based on lessons from Europe, predicting super-long JGB market following concerns about BoJ lagging
• Why Germany and Italy? Distinguishing between “falling behind” and “fiscal” concerns
• Germany: With easing fears about lagging amid absence of fiscal concerns, super-long bond yields declined
• Italy: Concerns about lagging eased, but super-long bond yields rose due to wider ASW spreads driven by fiscal uncertainty
• Two lessons learned from experiences in Germany, Italy
• Even if both concerns retreat, super-long government bond yields unlikely to trend downward if terminal rate uncertainty persists
• Yields on super-long JGBs unlikely to decline for now
• Appendix A
• Analyst Certification
• Disclosures
• Disclaimers

Report data

Graph 3. Germany and Italy: 30yr government bond yields, ASW spreads, BEI, and ECB policy rates

Reports in this series

Fixed Income Commentary is shown in chronological order through this edition, published on August 17, 2026.

Part of the Fixed Income Commentary series — view all 5 editions

Looking for the latest edition? Japan Economic Calendar (Sep 4, 2026)

1. Jun 15Fixed Income Commentary

Document Preview

Page 1 of 5

Subscribe for full accessCreate free account