Japan’s 30-year government bond auction drew its strongest demand in six years on Wednesday, signalling solid investor appetite even as long-term yields hover near multi-decade highs. The Ministry of Finance reported a bid-to-cover ratio of 4.04, sharply higher than 3.12 at the previous auction in November and the highest since 2019.
The auction also produced a much smaller tail of 0.09 yen, compared with 0.27 yen last month, indicating investors were willing to accept yields closer to the market clearing level and suggesting smoother price discovery.
The robust outcome points to renewed demand from both domestic institutions and overseas buyers, who see value at the long end of Japan’s yield curve despite the Bank of Japan’s ongoing policy-normalisation debate. Strong demand may help stabilise long-term rates after recent volatility driven by speculation over BOJ tightening.
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Bid-to-cover (BTC)
- Bid-to-cover measures how many bids were submitted relative to the amount of bonds the government is selling.
- Higher BTC = stronger demand.
- Example: A BTC of 4.0 means investors tried to buy four times more bonds than were available.
Auction tail
- The tail is the difference between the average accepted price and the lowest winning price in the auction.
- Smaller tail = smoother auction and stronger demand.
- Larger tail = weaker demand or more pricing uncertainty.
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And, the TL;DR for impressing potential partners at the pub later tonight:
- BTC: how oversubscribed the auction was.
- Tail: how tight and smooth the pricing was.
