Tokyo Japan's bond yields are headed toward levels last seen in 2003 amid central bank easing that Moody's Investors Service likens to monetisation.
Yields on the 10-year note touched 0.875 per cent last week, the lowest in 18 months.
The rate was within six basis points of the low achieved in 2010, when yields slid to a level unmatched since records fell in 2003.
Similar-maturity Treasuries yielded more than twice as much. Volatility on so-called swaptions linked to Japan's benchmark debt slid to the least since February, signifying diminishing expectations that the drop in yields will reverse.
Heeding lawmaker pleas to do more to defeat deflation, the Bank of Japan (BOJ) last month put itself on pace to scoop up 43 trillion yen (Dh1.97 trillion) of debt in the next 12 months, an amount equivalent to almost all new bonds the government plans to sell this fiscal year.
The BOJ buying is capping volatility prospects, which is in turn spurring investors to pile into bonds, according to Shuntaro Take, the deputy general manager for investment at Tokio Marine and Nichido Life Insurance.
"Investors expect the BOJ to give in to pressure for further easing because they are highly dubious about its success so far in ending deflation," said Take. "Markets are increasingly convinced this low-rate policy will persist, so any gain in yields induces dip buyers."