Market expectations for tighter monetary policy from the Bank of Japan are building, while demand at Japan’s latest two-year government bond auction came in weak. The bid-to-cover ratio fell to 2.97, below the previous 3.63 and under the 12-month average of 3.74. The tail widened to 0.034 from 0.007 a month earlier, marking the weakest result since 2016. ChainCatcher reported that the government led by Japanese Prime Minister Sanae Takaichi supports a rate hike as early as September. Overnight index swaps are pricing the probability of a September hike at about 84%. The figures point to a market that is increasingly preparing for policy tightening, while the auction data shows softer appetite for short-dated Japanese government debt.
Market expectations for Bank of Japan tightening are rising, and demand at Japan’s two-year government bond auction was weak, according to ChainCatcher.
The bid-to-cover ratio came in at 2.97, below the previous 3.63 and the 12-month average of 3.74. The auction tail was 0.034, up from 0.007 last month, making it the weakest since 2016.
ChainCatcher also said the government led by Japanese Prime Minister Sanae Takaichi supports a rate hike as early as September. Overnight index swaps show the probability of a September hike at about 84%.
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