Life insurance purchases support ultra-long-term Japanese government bonds, yields fluctuate within a range

(1) Japan's 30-year and 40-year government bonds remained stable on Wednesday, with life insurance institutions satisfied with the current yield levels, becoming the main support force at the ultra-long end. (2) Previous data from the Japanese Securities Dealers Association showed that life insurance institutions had a net purchase of ultra-long-end bonds exceeding 500 billion yen in September, marking the fourth consecutive month of net purchases. (3) The investment planning head from a major Japanese life insurance institution said the 30-year JGB yield around 4% is quite attractive, and even if the yield rises further or consolidates at this level, they are still willing to buy. (4) The same executive also stated that they do not recognize the strong bidding in the previous day's 20-year auction and are not pleased to see long-term yields falling. (5) The institution manages approximately 49 trillion yen in assets and recently bought when the 30-year yield rose near 4.2%, continuing to divert funds from taking profits in Japanese stocks to Japanese government bonds. (6) The executive expects the Bank of Japan to raise interest rates in December and again in March next year, and the market's expectation probability for a December rate hike remains above 80%. (7) On the day, government bond futures fluctuated within a narrow range, and the Bank of Japan's routine bond purchase operation results were largely in line with expectations, offering no clear direction. (8) The 20-year variety strengthened in early trading before turning weaker, with yields edging up; the 30-year yield once fell about 2 basis points to near 3.92%, and the 40-year yield also dipped slightly. (9) Short-term yields changed little, with the 2-year yield edging up and the 10-year yield declining slightly, and the overall yield curve saw minimal changes. (10) Market participants will continue to focus on the Bank of Japan's policy meeting at the end of October and the announcement of November's bond purchase plan, as the supply-demand structure at the ultra-long end and life insurance allocation demand remain key variables for the direction of yields.