Japan Bond Sale Demand Slumps in Sign of Growing Rate Hike Fears

Japan’s auction of two-year government bonds drew the weakest demand since 2009 amid rising speculation the central bank will raise interest rates as soon as October.

The bid-to-cover ratio, a key measure of demand, fell to 2.81 from the previous auction. It was significantly lower than the 12-month average of 3.79. Two-year notes extended declines, driving the yield up 1 basis point to 0.935%, the highest since 2008. Meanwhile, Japanese 10-year bond futures reversed gains, falling 12 ticks to 135.78 in afternoon trading.