The demand for Japan's 5-year government bond auction is weaker than the 12-month average, with political risks suppressing investor sentiment.

Demand for Japan's 5-year government bond auction was weaker than the average level of the past 12 months, as political risks intensified and deterred investors' buying intentions. The bid-to-cover ratio was 3.08, compared to 3.17 at the last issuance in December, and the 12-month average of 3.54. Following the auction results announcement, bond futures prices fell. Reports of Japanese Prime Minister planning to hold early elections have revived "Abenomics", causing the yen and Japanese bonds to decline. The yield on the 5-year government bond has risen to 1.615%, the highest level since the initial issuance in 2000. Investors are closely monitoring fiscal risks as dissolving the lower house could strengthen the ruling party's position and pave the way for more stimulus measures. After the yen fell to its lowest level since July 2024 against the US dollar, the possibility of an early interest rate hike by the Bank of Japan is also increasing.