Demand for Japan's 40-Year Government Bond Auction Hits Highest Level Since 2020

On September 29, Japan's 40-year government bond auction had a bid-to-cover ratio of 3.1, marking the strongest demand since 2020, up from 2.82 in the last auction and the 12-month average of 2.67. After the auction, Japanese government bond futures continued to rise, with the 40-year bond yield reported at 4.23%. Concerns are growing among investors that the Bank of Japan may fall behind the curve on monetary tightening. Earlier this month, Bank of Japan Governor Kazuo Ueda did not provide clear guidance on the pace of future interest rate hikes, leading to increased expectations that the central bank may need to adopt a more aggressive rate hike strategy.

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