New 10-year yield briefly rises to 2.900%, highest in 30 years

2026-07-09

Higher domestic yields

In Japan's bond market on the 9th, the yield on the newly issued 10-year government bond, a benchmark for long-term interest rates, briefly rose to 2.900%. That was the highest level in 30 years, since September 1996. It was up 0.035 percentage point from the previous day. Prices fell.

Middle East tensions and inflation concerns

Crude oil prices rose after renewed tensions in the Middle East, and selling in bonds accelerated on inflation worries. Trump said on the 8th that the ceasefire with Iran was 'already over'. The U.S. Central Command said on social media the same day that it had begun additional airstrikes on Iran. Iran has suggested it may again close the Strait of Hormuz.

Fiscal deterioration concerns

Expectations had spread since June that the fighting would end, but tensions in the Middle East are once again in focus. Inflation concerns have intensified on higher oil prices, adding upward pressure on interest rates. The 10-year Treasury yield, a benchmark for long-term U.S. rates, also at one point traded in the 4.59% range on the 8th, its highest since late May.

Concerns about fiscal deterioration under Sanae Takaichi's administration remain strong. In the draft of the government's Basic Policy on Economic and Fiscal Management and Reform, compiled at the end of June, the phrase 'fiscal consolidation', which had been included through 2025, was removed. In the market, the view has spread that aggressive fiscal policy under the Takaichi administration will loosen fiscal discipline and make rates more likely to rise, leading investors to hold back from buying.

The same draft said the Bank of Japan's 'appropriate conduct of monetary policy' is 'extremely important'. Economic and fiscal policy minister Minoru Kiuchi said on the 7th, regarding how the draft was received by the market, that it was a misunderstanding and that it was at odds with the intent. On the 8th, it became known that the government was coordinating to revise the wording. Even so, concern remains that the Bank of Japan's monetary policy could be swayed by the government's intentions, leaving it 'behind the curve' as price increases outpace rate hikes.

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