10-Year JGB Supply Goes Relatively Well

10-year JGB supply goes relatively well with the low-price meeting wider expectations (which stood at 100.56, per the BBG dealer poll).

• The cover ratio of 3.689x at the latest auction shows improvement compared to the previous auction's ratio of 3.60x. It is worth noting that the cover ratio from the previous auction marked the lowest level seen at a 10-year JGB auction since August '22.
• The steepness of the curve, along with the relative cheapness of 10-year JGBs compared to futures (7-year maturity), is likely to have contributed to the demand observed at today's auction. Furthermore, the auction's demand was likely supported by recent downside surprises in inflation data and the capital reallocation by local investors from abroad towards the longer end of the JGB curve during the current fiscal year.
• The comments made by BoJ Governor Ueda yesterday that there is a growing recognition that we may be experiencing a new normal, distinct from the "low for long" period doesn’t appear to have capped demand.
• JGBs futures initially gapped lower after the lunch break, but have subsequently retraced to be slightly above lunch break levels.
• Cash 10-year JGB is around 0.5bp richer than lunch levels with the yield at 0.437%, around 0.1bp higher on the day.