Japan's 10-year government bond auction on Thursday saw demand roughly in line
with the 12-month average. Bid-cover ratio was 3.21 (previous auction 3.76;
12-month average 3.24). The tail (average winning price minus lowest winning
price) widened to 0.25 from 0.02 last month. Domestic demand recovery and
foreign inflows are providing support to JGBs; the 10-year yield has fallen from
a late-September peak of 3.115% to 2.79%. The auction occurred amid declines in
US Treasury yields after the US midterms reduced near-term fiscal-expansion risk
with Democrats taking both chambers, and alongside lower crude prices as markets
price a rising likelihood of an end to the Iran conflict.
