TMGM：日本两年期国债拍卖在即，市场观望情绪浓厚？

Core Viewpoint - The Japanese bond market is closely watching the upcoming two-year government bond auction, which is seen as a critical indicator of investor sentiment amid rising inflation and discussions on potential further tightening by the Bank of Japan [1] Group 1: Auction Context - The auction occurs less than a week after the Bank of Japan raised its policy interest rate to a 30-year high, with no clear guidance on future tightening from Governor Kazuo Ueda [1] - The two-year government bond yield reached its highest level since 1996 earlier this week, indicating a market re-evaluation of future policy paths [1] - The 10-year breakeven inflation rate has risen to its highest level since 2004, reflecting sustained increases in medium- to long-term inflation expectations [1] Group 2: Market Sentiment - Market sentiment is cautious due to concerns over the speed of the central bank's policy response and the upward adjustment of inflation expectations and neutral interest rates [4] - Despite verbal warnings from Japanese authorities regarding exchange rates, the yen's depreciation and rising yields have not fully stabilized the market [4] - Overnight index swaps indicate a possibility of another rate hike by the Bank of Japan before September next year [4] Group 3: Auction Expectations - The upcoming auction may be the first issuance of two-year bonds with yields exceeding 1%, but uncertainty remains due to the recent rate hike and unclear policy outlook [4] - Traders currently price in the next 25 basis point rate hike only by September 2026 [4] - Investors are also focused on the upcoming fiscal year 2026 budget proposal, which is expected to increase the issuance of two-year, five-year, and ten-year bonds while reducing ultra-long bond issuance [4] Group 4: Auction Metrics - The auction results will be announced on Thursday at 12:35 Tokyo time, with key metrics such as bid-to-cover ratio and the "tail" between average and minimum accepted prices being closely monitored [5] - The previous auction in November had a bid-to-cover ratio of 3.53, which will serve as a benchmark for assessing market sentiment [5] - Increased issuance of two-year bonds may lead to a higher risk of short-term paper losses [5]