Japan 2-year bond yield dips ahead of auction as rate-hike bets weigh
TLT•Japan’s 2-year government bond yield fell 1.5 basis points to 1.945% ahead of an auction, as investors anticipated tepid demand and priced in possible Bank of Japan rate increases.
1. Yields and auction outlook
The 2-year Japanese government bond yield fell 1.5 basis points to 1.945% ahead of an auction of notes with the same maturity. The auction was expected to draw tepid demand as markets anticipated the Bank of Japan could accelerate its rate-hike cycle, with a possible increase as early as October.
2. Rate expectations
Swap rates implied a 36% chance of the BOJ raising its policy rate to 1.5% in October, while traders had fully priced in such a move by December. The BOJ raised its policy rate to 1.25% earlier this month. Japan’s 10-year yield edged up 1 basis point to 3.095%.
