Japan's 10-year government bond auction sees strong demand, with market interest rate hike expectations rising to 80%.

Golden Finance reported that the demand for Japan's 10-year government bond auction on Tuesday was stronger than the average level of the past 12 months, despite rising market expectations for recent interest rate hikes by the Central Bank. The bid-to-cover ratio was 3.59, up from 2.97 in the last auction in November and the 12-month average of 3.20. This auction took place after remarks by Bank of Japan Governor Ueda Kazuo on Monday, which the market interpreted as increasing the likelihood of an interest rate hike later this month. Ueda stated that the Bank of Japan would weigh the pros and cons of raising interest rates and take appropriate action, adding that financial conditions would remain accommodative even after a rate hike. Currently, the swap market suggests that the probability of a rate hike at the policy meeting on December 19 is about 80%, while the likelihood of a rate hike in January has risen to over 90%. In contrast, just a week ago, the probability of a December rate hike was only 36%. Meanwhile, the Japanese Ministry of Finance plans to increase the issuance of short-term debt to help fund Prime Minister Kishida Fumio's economic stimulus plan, raising the issuance of 2-year and 5-year government bonds by 300 billion yen each, and increasing the supply of treasury bills by 6.3 trillion yen. (Jin10)