Treasury bond yields closed higher across the board on the 9th. Japan's Government Bonds yields rose on expectations that the ruling Liberal Democratic Party's landslide win in the House of Representatives election (general election) will strengthen the stance for expansionary fiscal policy. Korea's Treasury bond yields tend to move in tandem with Japan's Government Bonds yields.
In the Seoul bond market that day, the three-year Treasury bond yield finished at an annualized 3.267%, up 3.4 bp (1 bp = 0.01 percentage point) from the prior transaction day. This is the highest level in 1 year and 7 months since June 13, 2024 (3.277%), a record high.
The five-year yield rose 3.4 bp to an annualized 3.555%. The five-year set a record high, the highest in 1 year and 9 months since May 2, 2024 (3.563%). The 10-year rose 4.4 bp to an annualized 3.754%. The 20-year rose 3.1 bp to an annualized 3.747%. The 30-year and 50-year rose 3.3 bp and 2.8 bp, respectively, to an annualized 3.645% and 3.517%. The 10-, 20-, 30-, and 50-year maturities set record highs, the highest in 1 year and 3 months since November 2023.
What influenced the Treasury bond market was Japan's general election the previous day. In the general election, the Liberal Democratic Party won 316 out of the total 465 seats, exceeding the 310-seat threshold needed to propose constitutional amendments. This is the largest number of seats the Liberal Democratic Party has secured since its founding. Because of this, the market is calling it a historically sweeping victory.
With the Liberal Democratic Party scoring a landslide, Japan is expected to strengthen an active fiscal stance. Prime Minister Sanae Takaichi has said that active fiscal policy is included in this Liberal Democratic Party platform and has expressed a willingness to expand fiscal spending. Such expansionary fiscal policy is likely to lead to Government Bonds issuance, which is a headwind for the bond market (bond prices fall and bond yields rise). On the day, Japan's 10-year Government Bonds yield jumped more than 5 bp from the previous session.