Japan’s 5-year JGB auction drew steady demand with a 3.10 bid-to-cover ratio and a modestly tighter tail, though participation was slightly softer compared with stronger sales last year.

• Japan sold ¥1.89 trillion of 5-year JGBs with a bid-to-cover ratio of 3.10 (vs 3.08 prior).

• Stop rate (highest accepted yield) came in at 1.646%, average yield 1.640%.

• Auction tail narrowed to 0.03 from 0.05, signalling relatively solid price discovery.

• Bid-to-cover was the lowest since August 2025, suggesting marginally softer demand.

• Overall result viewed as stable, with no signs of disorderly selling pressure.

Japan’s Ministry of Finance conducted a ¥1.89 trillion reopening auction of five-year Japanese government bonds (JGBs), drawing steady, though slightly softer, investor demand as yields remain elevated relative to recent years.

The auction achieved a bid-to-cover ratio of 3.10, meaning total bids were just over three times the amount sold. While marginally above the previous sale’s 3.08 reading, it was the lowest level since August 2025, hinting at some cooling in demand compared with stronger earlier auctions.

The lowest accepted price was 99.7900, with an average accepted price of 99.8200. Because bonds are priced relative to a face value of 100, a price below par implies a yield above the coupon rate. The stop rate, effectively the highest yield accepted at the auction, was 1.646%, while the average yield came in slightly lower at 1.640%. The bond carries a 1.600% coupon and matures in December 2030.

One closely watched metric, the “tail”, narrowed to 0.03 from 0.05 at the previous sale. The tail measures the gap between the average price and the lowest accepted price. A smaller tail typically signals tighter bidding and healthier demand, as investors cluster more closely around the clearing level.

The data also showed that 17.1% of bids were accepted at the lowest price, indicating a moderate concentration of demand at the cut-off level. In addition to competitive bids, the ministry allocated bonds through non-price competitive auctions, which allow certain participants to buy at the average accepted price.

Overall, the auction points to stable demand for intermediate Japanese debt, even as the Bank of Japan continues its gradual policy normalization. With five-year yields hovering around multi-year highs, investors appear willing to absorb supply, though not with the same intensity seen during periods of ultra-loose policy

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Jargon explained

• Bid-to-cover ratio: Total bids divided by the amount sold. Higher = stronger demand.

• Stop rate: The highest yield (lowest price) accepted in the auction.

• Tail: The difference between the average accepted price and the lowest accepted price. Smaller = smoother auction.

• Reopening: Additional issuance of an existing bond rather than a brand-new maturity