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(Bloomberg) — Japan’s auction of five-year sovereign notes met somewhat weak investor demand, highlighting the impact the central bank’s interest-rate hike last month has had on financial markets.
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The tail, or gap between average and lowest-accepted prices, came in at 0.05 in the sale by the Ministry of Finance of ¥2.3 trillion ($15.7 billion) of the bonds maturing in June 2029. That matched the highest since March last year, indicating sluggish demand, and compared with 0.01 at last month’s auction.
In another sign of limited investor desire for the notes, the average bid-to-cover ratio for the bonds was at 3.51, the lowest in six months, Bloomberg-compiled data show. The coupon on the debt was 0.4%, less than 0.6% last month, reflecting the tumble in five-year yields after the Bank of Japan’s July 31 rate hike.
The rate increase unleashed higher volatility in markets, with the 10-year government bond yield plummeting last week to 0.75% from above 1% in the previous week. Unexpectedly weak US economic data spurred risk aversion that rattled global share markets and boosted debt.
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