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Failed Japanese bond auction sends global yields higher

Japan's bond futures plummeted at the fastest rate in three years in the wake of a weak 10-year debt auction, sending government yields in several countries higher, Bloomberg News reported.

The weak demand for Tokyo's government debt prompted a sharp rise in U.S. and European treasury and government debt yields. Futures of Japan's 10-year notes fell 0.97 yen to 154.05 yen, after the auction registered the lowest bid-to-cover ratio since 2016, Bloomberg News reported.

The auction's poor performance follows the Bank of Japan's decision to possibly cut bond purchases and the Government Pension Investment Fund's plan to buy more foreign debt, Bloomberg reported. "Investors are reluctant to buy given the risk of the BOJ skipping a purchase," Eiji Dohke, the chief bond strategist at SBI Securities, told Bloomberg.

The Bank of Japan cut purchase ranges for four maturities and signaled on Sept. 30 that it may halt buying operations as well as the purchase of debt exceeding 25 years, Bloomberg News said. "Japanese bonds have reached the point where it's almost impossible to buy," Takahiro Sekido, a former Bank of Japan official, told Bloomberg News.