Morgan Stanley: If the ruling party fails, the 30-year Treasury bond yield may rise to 3.2%

Morgan Stanley MUFG Research analysts Hirou Uezato and Koichi Sugisaki stated that if the current ruling party in Japan wins a majority of seats in the election, the prospects for relatively moderate fiscal stimulus measures may push down the 30-year Japanese government bond yield to around 2.90%. If the ruling party fails to secure a majority of seats, the prospect of large-scale fiscal stimulus may push the 30-year Japanese government bond yield up to 3.2%. They noted that after a market deterioration in May, ultra-long Japanese government bonds temporarily stabilized, but after the auction of the 30-year Japanese government bonds in early July, a weak supply and demand momentum resurfaced, resulting in an increase in term premiums. Against a backdrop of structurally weak supply and demand, investors remain very concerned about the risks facing Japan's fiscal discipline.