Japanese insurance firms sold domestic ultra-long government bonds in May as yields climbed to multi-decade highs, reversing a trend of purchases seen at the start of the fiscal year.

Data from the Japan Securities Dealers Association shows that domestic insurers were net sellers of Japanese government bonds with maturities exceeding 10 years to the tune of 201.2 billion yen (approximately $1.25 billion) during the month. This followed net purchases of 327.2 billion yen in April, the first month of the fiscal year.

Despite Japanese government bond yields reaching multi-year highs in May, concerns that the Bank of Japan may not be able to tighten policy swiftly enough to curb inflation diminished the appeal of the bonds. Market unease was further compounded by expansionary fiscal policies and a preference for loose monetary settings from the administration.

Miki Den, a senior rates strategist at SMBC Nikko Securities, noted, "Yields rose significantly and volatility was high in May, which likely led investors to adopt a wait-and-see stance. April was somewhat unique as it marked the beginning of the fiscal year, giving investors more budgetary flexibility."