Japan’s two-year government bond auction on Thursday, August 28, 2025, showed the weakest demand in 16 years. This weak demand is largely attributed to investor caution regarding a potential interest rate hike by the Bank of Japan later in the year.
The auction results immediately impacted the secondary market. The two-year yield, which is particularly sensitive to monetary policy changes, saw its decline trimmed to trade at 0.86%. This figure is only a few basis points below its highest level since 2008. Bond futures, however, remained largely unchanged following the auction.
