Japan's Two-Year Government Bond Auction Sees Weakest Demand Since 2016

Demand for Japan's two-year government bonds hit its lowest level since 2016 during a recent auction, with a bid-to-cover ratio of 2.97, significantly below the 12-month average of 3.74. The tail of 0.034 also marked the weakest performance in years. This tepid demand follows rising expectations for the Bank of Japan to tighten monetary policy, with overnight index swaps indicating an 84% probability of a rate hike as early as September.