Japan's government bond auction "sold out in seconds", interest rates slightly retreated, and the market is certain that there will be a rate hike by the end of the year.

The 10-year Japanese government bond auction concluded smoothly, but interest rate hikes and fiscal stimulus are pushing the Japanese bond market toward a new normal of dramatic fluctuations (Background: Rich Dad: Japan's 30-year “spread trading end” epic bubble is coming, I will teach you ten tricks to survive) (Supplementary Background: Japanese netizen's father passed away, “Bitcoin inheritance” worth 100 million yen, with 62 million yen in taxes to pay?) On Tuesday afternoon in Tokyo, the 10-year Japanese government bonds were successfully auctioned off amid the market's original concerns about selling pressure, with the bid-to-cover ratio rising and the tail-end spread narrowing, temporarily suppressing the yield from breaking the 17-year high. However, the real storm is about to arrive: in two weeks, Bank of Japan Governor Kazuo Ueda is almost certain to initiate the first interest rate hike since 2007, while Prime Minister Fumio Kishida is simultaneously presenting a 21 trillion yen stimulus plan, and the world's third-largest bond market is undergoing a price reassessment, with Wall Street and Silicon Valley both feeling the liquidity gates slowly closing. The auction held firm, while short positions retreated. The bid-to-cover ratio in this auction surged to 3.59, a recent high; the “tail-end spread” narrowed to 0.04, indicating a decrease in price divergence, and the yield on the 10-year spot bonds fell to 1.865%. DBS Bank strategist Eugene Leow believes this is more like a technical rebound after the yield approached the psychological barrier of 2%, rather than a long-term investment in Japan's growth. In other words, the market is merely taking a short breather. Interest rate hikes are almost a certainty. Ueda's latest public remarks likened the end of negative interest rates to “slightly easing off the gas pedal, rather than slamming on the brakes.” The market immediately interpreted this as a green light for interest rate hikes. Swap contracts indicate an approximately 80% chance of a rate hike at the December 19 meeting, with a likelihood exceeding 90% in January next year. According to the Japan Times, the yield on 2-year government bonds in Japan has surpassed 1%, reaching a new high since 2008, and the signals for normalizing short-term rates are becoming increasingly clear. Fiscal stimulus is being pushed to the limit. In contrast to the central bank's tightening, Kishida's 21 trillion yen plan requires an additional issuance of 6.3 trillion yen in short-term treasury bills, putting pressure on the bond market from the supply side. The 30-year government bond auction in two days is seen as a true test; although current long-end yields have risen to 3.40%, attracting some insurance capital back, the market remains concerned that the term premium will be further elevated. The Economic Times cited Lombard Odier, stating that it is too early to say yields have peaked before the fiscal details are clarified. Spillover effects are approaching. The yen's risk-free rate is nearing 2% or even 3%, making the arbitrage logic of financing U.S. stocks or Bitcoin with low-interest yen less attractive. As interest rate hike expectations boost the yen, profits for Japanese export companies are under pressure, and foreign capital's holdings in Japanese stocks and bonds are becoming more volatile. If capital returns to Tokyo due to rising domestic interest rates, the financing costs for U.S. Treasury bonds and global risk assets may also rise in tandem. The 10-year Japanese government bond auction is just the first defensive battle. When the central bank retracts its zero-interest rate incentives while the government simultaneously expands spending, the Japanese bond market transforms from a sleeping giant into a high-volatility battlefield. For global investors, ignoring the signals released from Tokyo could come at a high cost. Related Reports: Japan's regulatory upgrade “strongly promotes reserve requirements,” exchanges need to set aside cash deposits for compensating users. The yen falls below its October low! Kishida throws 21.3 trillion yen in fiscal spending to rescue Japan, and the market fears a vicious cycle. Bloomberg reveals that Japanese exchanges are studying “resisting DAT companies”: reducing the hoarding of cryptocurrencies like Metaplanet. <Japan's government bond auction “sold out in seconds,” yields slightly retreat, and the market is certain of a rate hike by the end of the year> This article was first published in BlockTempo, the most influential blockchain news media.