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Long-bond fever ignores interest rate perils

TOKYO -- Yield-hungry investors are snapping up long-term bonds as fast as companies can issue them, decoupling yield and creditworthiness in a way that could prove dangerous if interest rates begin to rise.

The boom in ultralong bonds with maturities over 10 years shows no signs of abating, said an official who underwrites corporate bond floats for a Japanese brokerage. The comment was made on Friday afternoon -- the same day the Bank of Japan decided against taking interest rates even further into negative territory. That negative-rate policy, introduced in February, kicked off the surge in long bonds. Noting the difficulty for investors to generate returns with more conventional instruments, the official said that issuance of long-term corporate debt would likely keep growing in August and beyond.

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