High yields on Japanese bonds attract investors, two-year government bond auction proceeds smoothly amid rate hike uncertainties

Golden Ten Data, March 31 – Due to attractive yields drawing investors, the Japanese two-year government bond auction was completed smoothly, despite market caution over the Bank of Japan potentially raising interest rates in the near term. The bid-to-cover ratio at Tuesday’s auction reached 3.54, higher than the previous auction’s 3.32 and close to the 12-month average of 3.59. After the auction concluded, Japanese government bonds continued to gain. The two-year yield, which is more sensitive to monetary policy expectations, climbed last week to its highest level since 1995. The Bank of Japan, while keeping policy unchanged at its latest meeting, has left open the possibility of a rate hike in April. Overnight index swaps indicate about a 68% chance of a rate increase next month. Miki Den, Senior Rates Strategist at SMBC Nikko Securities, stated: “The attraction of high yields has outweighed negative factors such as rising oil prices and inflation concerns, allowing the auction to be completed smoothly.”