Japan’s Weak Two-Year Bond Sale Shows Growing Rate Hike Risk

Japan’s two-year government bond auction Friday was met with weak demand, as rising expectations of a near-term Bank of Japan rate hike sapped investor appetite.

The bid-to-cover ratio was 3.53, compared with 4.35 at the previous sale in October, and a 12-month average of 3.66. In another sign of weak investor demand, the tail, or gap between average and lowest-accepted prices, was 0.012, compared with 0.002 last month. Bond futures held on to small losses after the auction.