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Japan's 10-year JGB yield rises as market assesses GPIF's potential allocation shift
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Japan's 10-year JGB yield rises as market assesses GPIF's potential allocation shift
Jul 12, 2026 11:56 PM

(Rewrites throughout, adds comments in paragraph 6, updates

yields,)

By Junko Fujita

TOKYO, July 13 (Reuters) - Japan's 10-year government bond

(JGB) yield reversed course and rose on Monday as the market

assessed the impact of a potential shift in the Government

Pension Investment Fund's (GPIF) investment strategy.

The benchmark 10-year JGB yield rose 3 basis

points (bps) to 2.79%, after falling to as low as 2.735% earlier

in the session. Yields move inversely to bond prices.

The yield on 10-year bonds fell 17 bps on Friday as bond

sentiment was boosted after Finance Minister Satsuki Katayama

said the government would explore measures to encourage the GPIF

to increase investments in domestic financial assets.

"The market overreacted to Katayama's comments," said Rinto

Maruyama, senior strategist at FX and rates at SMBC Nikko

Securities.

"Traders scooped up the bonds on Friday as they were looking

for a cue to buy back JGBs whose prices fell sharply throughout

the week," he added.

The JGBs were sold after the government unveiled an economic

blueprint last month, as fears for spending and doubts about the

Bank of Japan's ability to tighten monetary policy grew.

On Monday, the market assessed the impact of the GPIF's

potential shift in allocations, Maruyama said.

Under the current framework, the GPIF could increase its

allocation to domestic bonds by up to 12.26 trillion yen ($75.70

billion).

If 70% of it is allocated to 10-year JGBs and spent over

three years, that would push down the yield of 10-year bonds as

much as 7 bps, Maruyama said.

If other investors follow the GPIF's lead, the 10-year bond

yield could fall by as much as 20 bps, he added.

But given that nothing has been decided on the move, the

reaction on Friday was too much, Maruyama said.

The GPIF currently maintains roughly equal allocations to

domestic equities, foreign equities, domestic bonds and foreign

bonds.

The five-year yield rose 1.5 bps to 1.995%.

($1 = 161.9600 yen)

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