Demand at Tuesday's five-year JGB auction was the strongest since June 2025 as
higher yields attracted buyers. The bid-cover ratio was 4.15 versus 3.43 at the
prior auction and a 12-month average of 3.34. The tail (average price minus
lowest accepted price) tightened to 0.02 from 0.03 a month earlier. JGB yields
have risen in recent weeks amid reports the TAKAICHI-led government supports
near-term tightening by the BANK OF JAPAN; overnight index swaps imply a 75%
chance of a BANK OF JAPAN hike before September and fully price an October move.
The rise in yields reflects weakening global confidence in bonds, with investors
demanding greater compensation for duration risk. 30-year US Treasury yields
climbed to near 20-year highs on concerns about higher government spending,
heavy long-term issuance and persistent inflation.
