Japan’s finance ministry is considering trimming its issuance of super-long bonds starting in July, according to a draft of a revised bond issuance plan seen by Bloomberg.

The ministry is set to propose cutting issuance of 20-, 30- and 40-year bonds by ¥100 billion each per auction through the end of March 2026, the draft plan showed Thursday. To offset the decrease, the ministry is considering increasing issuance of 2-year bonds and other shorter-dated debts. 

In total, the issuance of 40-year bonds will be reduced by ¥500 billion to ¥2.5 trillion this fiscal year, while offerings of 30- and 20-year bonds are expected to lowered by ¥0.9 trillion each, according to the proposed revision to this fiscal year’s plan. 5-year and 10-year issuance will be unchanged.

As the central bank steps away from massive bond buying and concerns increase over Japan’s long-term fiscal health, the country’s super-long yields had jumped earlier in the year. Those moves caused ripple effects across the world and led to speculation that the ministry will act to tamp down volatility.

While overall issuance volume will remain unchanged in principle, total market issuance via auctions will edge down to ¥171.8 trillion for the year from current ¥172.3 trillion, according to the proposed revision.

Reuters reported similar news on the bond issuance plan earlier Thursday.

Yields were lower in Tokyo on Thursday afternoon for maturities from two- to 20-years, with the biggest declines at the short end. The largest move lower in yields was in the five-year tenor, following an auction of this maturity that drew strong demand, and as the MOF indicated no plans to increase issuance of this debt. Yields for 30- and 40-year bonds edged up.

The ministry will present the proposal to primary dealers at a meeting scheduled for Friday, the plan shows. The meeting is drawing heightened attention from investors as expectations rise that the ministry will scale back its issuance of super-long maturity bonds following a period of sharp yield volatility.

“Since the supply-demand imbalance for outstanding bonds will not fully recover, the situation may stabilize but yields won’t return to their previous levels,” said Mari Iwashita, executive rates strategist at Nomura Securities Co. “I think we’re entering a period where we will need to explore what yield level would be fair value.”

MOF will also clarify its stance on potential bond buybacks during the meeting, after reports emerged suggesting it was considering such measures, according to a person familiar with the matter. 

The ministry earlier pushed back on speculation it might try to help ease concerns over demand by buying back bonds as soon as next month, calling that idea unrealistic.

With assistance from Mia Glass and Brett Miller.

This article was generated from an automated news agency feed without modifications to text.