The yield on Japanese government bonds has climbed to levels that are "eye-popping," and a 10-year yield near 3% now presents an attractive buying opportunity, according to Morgan Stanley.

Matthew Hornbach, global macro strategy head at the firm, stated in an interview that if the 10-year Japanese government bond yield reaches 3%, he would definitely consider purchasing. He finds this level very appealing.

"Buying a bond with a 3% nominal yield while expecting Japan's underlying inflation to stay closer to 1% over the next decade gives you a real yield of 2% immediately," Hornbach explained.

This real rate of return is "competitive" when compared to global bonds, especially given Japan's ongoing demographic challenges and the impact of an aging population on productivity growth.

The 10-year Japanese government bond yield is currently hovering around 2.80%, near its highest level in almost 30 years. Long-term Japanese bonds have been sold off heavily due to perceptions that the Bank of Japan is slow to raise interest rates and concerns over the sustainability of Japan's debt.

Hornbach expects the Japanese government bond yield curve to steepen further and sees the 5-year to 10-year segment as offering the best value.

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Editor: Ding Wenwu