日本2年期国债标售疲软，市场预计通胀或倒逼央行“更猛烈加息”

Core Viewpoint - The market is experiencing increased inflation expectations and pressure from the depreciation of the yen, leading to a potential need for the Bank of Japan to adopt a more aggressive interest rate hike strategy, which has resulted in weak demand for the 2-year Japanese government bond auction held on December 25 [1][4]. Group 1: Auction Results - The bid-to-cover ratio for the 2-year bond auction was only 3.26, down from 3.53 in the previous auction and below the 12-month average of 3.65, indicating weak demand [1]. - Following the auction results, the yield on the 2-year government bond rose by 2.5 basis points to 1.125%, marking the highest level since 1996 [1]. Group 2: Market Sentiment - The weak auction results highlight market unease regarding the Bank of Japan's policy stance, with the 10-year breakeven inflation rate reaching its highest level since data collection began in 2004 [4]. - There are concerns that the Bank of Japan is lagging behind inflation trends, which may lead investors to avoid 2-year bonds due to their sensitivity to such risks [5]. Group 3: Interest Rate Expectations - The market anticipates a possibility of another interest rate hike by the Bank of Japan before September next year, as indicated by overnight index swaps [5]. - The Bank of Japan's recent verbal warnings regarding the yen's depreciation have somewhat alleviated the pressure, but the auction results remain a key indicator of market sentiment towards the central bank's policies [5]. Group 4: Bond Issuance Plans - Investors are concerned about the government's bond issuance plans related to the fiscal year 2026 budget, which is expected to be approved soon [6]. - Major dealers have expressed a desire to increase the issuance of 2-year, 5-year, and 10-year bonds in the next fiscal year while calling for a reduction in the sale of ultra-long-term bonds [6]. - The new issuance of ultra-long-term bonds may be reduced to approximately 17 trillion yen (about 109 billion USD), the lowest level in 17 years [6].