Japan's sale of 10-year government bonds on Tuesday arrives as investors brace for the 3% threshold on benchmark yields and reposition for potential policy tightening. The yield touched 2.965% on Tuesday, the highest in three decades, as the BOJ heads into its Sept. 18 decision. At 9:26 a.m. local time, JGB futures were down 21 ticks at 125.76.
Bloomberg's Markets Live strategist Mark Cranfield said the auction was already facing a difficult backdrop even before Treasury yields jumped to a 19-month high, reinforcing the risk that Japan's 10-year benchmark could climb above 3%. The auction outcome is due at 12:35 p.m. in Tokyo, and investors will zero in on demand metrics such as the bid-to-cover ratio, which was 2.56 at last month's 10-year sale, the weakest since May 2025.
BOJ Deputy Governor Ryozo Himino said last week that an increase this month remains on the table. Overnight index swaps reflect roughly a 90% probability of a September hike.
NHK reported that US Treasury Secretary Scott Bessent told Finance Minister Satsuki Katayama and BOJ Governor Kazuo Ueda that raising interest rates should be Japan's next step.
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Investors will also scrutinize Thursday's 30-year JGB offering as concerns about Prime Minister Takaichi's fiscal stance pressure super-long debt. Weak bidding across this week's sales could trigger a broader selloff that reverberates globally and complicates Bessent's effort to tamp down longer-maturity Treasury yields.
