I see some people are still puzzled about why government bond yields are soaring while the subscription multiplier is also surging—put simply, it’s because they don’t really understand how auctions work.

Let’s look at it from another angle. Imagine you’re at an auction house looking at a vase. The starting bid is 500,000; someone calls out 510,000, you go with 520,000—that’s how the secondary market works: open bidding, and whoever bids higher gets it.

But government bond auctions don’t work like that. They’re sealed bids—each institution writes a number and puts it in a box, unable to see what others are bidding. Suppose the market estimates the vase is worth 510,000, but when the bids are opened: some bid 500,000, others 490,000, and someone even goes straight to 480,000…

Logically, you’d think you should just go for 510,000 and take it, right? Here’s the problem—why buy the vase? To flip it for a profit. If I buy it at 510,000 and sell it again at 510,000, after deducting fees, I’ll end up losing money—only a fool would do that.

So, on the surface, there are tons of institutions participating, but in reality, everyone is doing their own calculations: “I’m not in a rush, I’ll just wait for a bargain.” In this case, what’s being auctioned isn’t really the market price—it’s about who can hold their nerve the longest.

Then why are so many people joining the crowd? Take Japanese government bonds for example—the prices keep dropping, yields keep climbing, and institutions see: “Hey, isn’t this a chance for free money?” Everyone thinks, “What if I get lucky?” Anyway, there’s no loss in bidding low. With more participants, the subscription multiplier naturally goes up.

In the end, the market isn’t going crazy—it’s a game of human psychology.