Market Brief: JGBs & US Fed Outlook **Date:** Saturday, January 31, 2026 **Executive Summary** Japanese government bond (JGB) yields diverged on Friday, with super-long maturities climbing sharply. The move was driven by the convergence of domestic fiscal anxieties and the now-confirmed reports that **President Donald Trump** has selected **Kevin Warsh** as the next Federal Reserve Chair. While the 10-year benchmark saw a reprieve, the longer end of the curve repriced the risk of a hawkish shift in US monetary policy. **Key Market Movements (Jan 30 Close)** * **20-Year JGB Yield:** Rose to **3.18%** (up ~1.2 bps), reflecting heightened sensitivity to global rate expectations. * **10-Year JGB Yield:** Dipped slightly to **2.25%** (-0.7 bps) as investors covered short positions after the yield recently breached the **2.33%** level earlier this year. * **30-Year JGB Yield:** Climbed to **3.64%**, nearing multi-decade highs. * **USD/JPY:** Trading around **154.57**, with the yen remaining under pressure despite recent stabilization efforts. **Drivers & Analysis** * **US Fed Nomination:** Speculation solidified into news on Friday that **Kevin Warsh** is Trump's pick to succeed Jerome Powell in **May 2026**. Markets perceive Warsh as a potential disruptor who may favor a stricter monetary regime, sparking a sell-off in long-duration global assets, including Japanese super-longs. * **Domestic Fiscal Fears:** The JGB market remains fragile due to Prime Minister **Sanae Takaichi’s** expansionary fiscal pledges. With Japan's inflation holding above **3.0%** and the Bank of Japan’s policy rate now at **0.75%**, investors are demanding higher premiums for holding long-term government debt. * **Curve Steeper:** The divergence—shorter yields holding steady while super-longs rise—indicates a steepening yield curve. Investors are sheltering in shorter maturities (2-year yields at **1.25%**) while dumping longer-dated bonds vulnerable to inflation and aggressive US policy shifts. **Outlook** Market volatility is expected to persist as the Senate confirmation process for Warsh begins and Japan approaches its snap election on **February 8**. Traders will be closely watching for any coordinated "rate checks" by the Ministry of Finance if the yen weakens further past the **155** handle.