An auction of 30-year Japanese government bonds drew limited demand Thursday as investors held out for higher yields amid speculation the central bank will continue to tweak monetary policy.

The Ministry of Finance’s sale saw a lower-than-expected cut-off price, indicating poor appetite among buyers, reinforcing a trend seen with potential buyers baulking at the yields in offers earlier this week and last month. The market will be tested again next week with scheduled auctions of five-year and 20-year securities.

The drop-off in demand for JGBs underscores the challenges the Bank of Japan will face when it comes to trying to unwind its super-easy monetary policy, while also making it pricier for the government to borrow money. The weakness in this latest sale is significant because the 30-year tenor can typically count on firm demand from life insurers, who purchase these securities to help manage their long-term obligations to policy holders.

“The weak results will keep concerns alive about the upcoming auctions and cap the upside for JGBs,” said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management Co. “Lingering speculation that the BOJ will adjust its monetary policy again is adding to downward pressure on the debt market.”

Bond yields globally have been rising, most notably in the US, as central banks hike benchmark borrowing costs to try to quell inflation. The 10-year US Treasury yield has climbed more than 20 basis points from a Sept. 1 low to around 4.28% on Thursday, while its Japanese counterpart remains within reach of a nine-year high set last month.

The BOJ tweak it yield-curve control settings July to potentially allow the 10-year yield to rise to 1%.

--With assistance from Hidenori Yamanaka.

(Adds strategist comment and bond auction schedule next week)