While much of the market focus has fallen on the US long-end, which saw substantial pressure in the past week, sending 30Y yields to 5.27%, the highest level since 2007, it was Japan again which stole the show overnight. But first, recall that the primary tradeoff for the BOJ preventing it from raising rates and comfortably pushing up the yen without needing to spending tens of billions in massive interventions (whether individual or joint with the US), is that raising rates risks collapsing the world's biggest house of cards, which is the Japanese bond market, the world's, second biggest of which half is now owned by the Bank of Japan.
Well, early on Tuesday morning Japan had its first major coupon auction since the latest intervention and it went... catastrophically.
The auction, which saw a huge tail, the second highest since the start of the century...
... and dismal demand in the form of a collapsing 2.56 bid to cover, far below the 3.3 average, the lowest since May 2025...
... and the third lowest going back all the way to 2015.
... sent the yield on 10Y paper as spiking as much as 5bps higher to 2.87% with JGB futures tumbling as much as 34 ticks to 126.37.
The lowest pr
