Japanese Government Bonds Decline as “Tails” in Pricing Highlight Weak Auction Demand

Demand for the auction of 20-year Japanese government bonds (JGBs) has shown weakness, driving an indicator of investor interest to its lowest level since 1987. This has subsequently triggered declines in long-term government bonds and JGB futures.

The spread between the average price and the stop-out price in this auction has reached the highest level since 1987.

The presence of “price tails” signifies lackluster demand in bond auctions, indicating that marginal buyers in the auction are only willing to purchase government bonds at prices significantly below the average level.