Japan's auction of 10-year government bonds on Tuesday will test demand for this key maturity as yields approach the milestone of 3% and investors position for an interest rate hike from the central bank. The yield touched a three-decade high of 2.95% on Monday, closing in on the 3% level ahead of the Bank of Japan's Sept. 18 policy decision.

BOJ Deputy Governor Ryozo Himino kept the door open to an increase this month in a speech last week. The sale comes as global bond markets grapple with shifting monetary policy expectations.