Japan’s auction of 10-year sovereign notes met the weakest investor demand since 2003 by one measure, in another sign of the turmoil hitting the nation’s financial markets after the central bank increased interest rates last month.

The tail, or gap between average and lowest-accepted prices, came in at 0.5 in the sale by the Ministry of Finance of ¥2.6 trillion ($17.9 billion) of the benchmark bonds maturing in June 2034. The gauge was just 0.02 at last month’s auction. And in another sign of poor demand, the average bid-to-cover ratio for the bonds fell to 2.98, the lowest since January, Bloomberg-compiled data show.

On Monday, the 10-year JGB yield plummeted by 20.5 basis points, the most since 1999, as weak US economic data spurred risk aversion that rattled global share markets and boosted debt. Japan’s Topix and Nikkei stock indexes both dropped 12% as a surge in the yen dragged down exporter shares on concern about their earnings prospects. The share indexes recouped some of their losses and the yen shed part of its gains on Tuesday.

Indications that falling yields are sapping investor demand for debt weighed on bond prices. The yield on 10-year bonds rose 20 basis points on Tuesday to as high as 0.95%, while futures for 10-year bonds fell 150 ticks to 144.56 at 1:57 p.m. in Tokyo.

Officials from Japan’s Ministry of Finance, the Bank of Japan and the Financial Services Agency will meet from 3 p.m. in Tokyo to discuss international markets, according to a notice from the BOJ.

The yen has gained about 5% against the dollar since the BOJ raised interest rates to 0.25% on July 31.

  - Reuters