Japan 40-Year Bond Auction Draws Weakest Demand Since 2011

Japan’s Ministry of Finance drew its poorest investor response in 14 years at Wednesday’s sale of 40-year government bonds, with demand weakening to its lowest level since 2011. The bid-to-cover ratio, a key gauge of appetite, slipped after authorities had already reduced the size of the offering in an effort to underpin interest. Market participants attributed the soft take-up to growing unease over the country’s fiscal outlook following Prime Minister Shigeru Ishiba’s historic election defeat earlier this month. Talk of a possible snap election and speculation that government spending will continue to rise have pushed some investors to the sidelines. The muted auction adds pressure on policymakers as they consider how to finance long-term obligations without further unsettling Japan’s super-long debt market, where initial selling was also reported in five- and ten-year bonds ahead of the sale.