Investors bid ¥3.14 trillion for ¥537 billion of 20-year sovereign debt in an Oct 20 auction that saw the highest demand for that maturity since records began in 1987. The sale attracted a bid-to-cover ratio of 5.84, compared to 4.01 at the previous sale and a 12-month average of 3.73, with buyers receiving an average auction yield of 3.723%.
The increase in demand followed a rise in 20-year yields to their highest since 1995, prompting a return of domestic institutional investors, including banks and pension funds, which made up over 83% of the bids. Market yields for the 20-year bonds subsequently fell to 3.62% by Oct 23. This shift occurs as Japan’s finance ministry requests ¥16.6 trillion for interest payments in the next fiscal year, a 27% increase, while the government sold ¥250 billion of existing super-long bonds on Oct 27.