The Japanese government will test demand in the bond market with auctions in key 10-year and 30-year maturities this week after investors baulked at the yields on offer in sales last month.
The Ministry of Finance will sell ¥2.7 trillion of 10-year notes on Tuesday and ¥900 billion of 30-year securities on Thursday. The debt offerings come as investors watch how much the Bank of Japan is willing to let benchmark yields rise after tweaking its yield curve control program in late July.
A dropoff in demand for Japanese government bonds reflects the challenges the BOJ will face in trying to unwind a super-easy policy that’s been in place for a decade. Rising interest rates will make it pricier to borrow money and if they trigger a strengthening in the yen, that may weigh on Japan’s exporter-heavy share market. Higher yields will also mean that the government’s debt-servicing costs will climb next year.
Bond auctions in Japan last month underscored the weakness of demand for debt as investors waited for higher yields.
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