(Bloomberg) -- In another sign of rising interest rates in Japan, the gap between 30-year government bond yields and swaps contracts has widened to the most in a more than a decade.

Yields on the super-long notes — which are typically favored by Japanese life insurers — have outstripped the gains in the swaps rate as buyers of government debt hold back on expectations of further increases.

Investors often hedge their bond holdings by exchanging fixed-rate swap contracts for floating-rate ones. That means that even if they lose money on bonds when yields rise, they will receive interest from their floating contracts that at least partly make up for the losses.

The difference between 30-year bond yields and equivalent swap rates has ballooned to 42 basis points on Wednesday, the widest since November 2012, according to Bloomberg-compiled data. 

Usually in this kind of situation, traders will try to profit from arbitrage, buying bonds on bets the JGB-swap gap will shrink to more normal levels. But if anything the spread has been widening, likely reflecting market concern that bonds will be hammered by the BOJ’s reduction of bond buying. 

Some traders are speculating that the central bank will decide to decrease its JGB purchases from the current monthly total of about ¥6 trillion ($38 billion) at its monetary policy meeting in June. 

Any further rises in super-long bond yields likely won’t be enough to encourage much more purchases by Japanese institutional investors. They are heavily invested in foreign bonds that still have much higher yields.

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