FX.co ★ Japan 10-Year Yield Falls on Strong Auction

On Tuesday, the yield on Japan's 10-year government bonds decreased to approximately 1.86%, following a spike to its highest level in over 19 years during the prior session. This decline was attributed to robust demand observed in a recent 10-year bond auction, which contributed to market stabilization. The bid-to-cover ratio reached 3.59, surpassing November's figure of 2.97 and the 12-month average of 3.2. Additionally, the tail, which represents the difference between the average and lowest-accepted prices, significantly narrowed to 0.04 from the previous month's 0.13. The bond market had recently been unsettled by comments from Bank of Japan Governor Kazuo Ueda, who indicated that the central bank would assess the advantages and disadvantages of raising rates and make decisions accordingly. Current swap markets suggest an 80% likelihood of a rate increase on December 19, with the probability of a January hike increasing to nearly 90%.