Demand at Japan's two-year government bond auction weakened to the lowest level
since 2016: bid-cover ratio 2.97 versus 3.63 at the prior auction and a 12-month
average of 3.74. The tail (average awarded price minus lowest awarded price)
widened to 0.034 from 0.007 last month, signaling soft investor interest. JGB
yields have risen sharply as markets increase bets on BOJ tightening. Reports
say Prime Minister Takaichi's government supports a rate hike as early as
September to counter yen weakness. Overnight index swaps put the probability of
a September BOJ hike at about 84%; markets are fully pricing an October move.
