Japanese government bonds retreated from multi-decade highs after the latest 40-year auction attracted its strongest demand since 2020. The bid-to-cover ratio rose to 3.1 from 2.82 at the previous sale and above the 12-month average of 2.67, while the 10-year JGB yield slipped to around 3.08% after earlier trading at 3.090%. Japan’s 40-year yield remained above 4.2%. Persistent concerns about energy-driven inflation, reinforced by rising oil prices and uncertainty over a potential U.S.-Iran agreement, have strengthened expectations that the Bank of Japan could accelerate monetary tightening. A former BOJ official said the central bank could raise its benchmark rate for a second consecutive month at its October meeting because of elevated inflation risks.