10-Year Supply Due

The Japanese MOF will today sell Y2.6tn of 10-Year JGB's opening #JB362. The MOF last sold 10-Year debt on March 2, the auction drew cover of 3.140x at an average yield of 0.131%, average price of 99.70, high yield of 0.134%, low price of 99.67, with 30.8194% of bids allotted at the high yield.

• The adjustments seen in the BoJ's April Rinban plans (with over 50% of the previously flagged Y550bn m/m decrease in JGB purchases coming via the 5- to 10-Year bucket) could provide significant headwinds for today's supply.
• The adjustments have made for some pre-auction concession, with 10-Year yields now sitting around the middle of the range witnessed since late February.
• Any prospective longs will likely lean on the asymmetric nature of the BoJ's permitted 10-Year yield trading band and continued failure to stoke the inflationary embers, although the broader core global FI environment must also be considered and could pose further headwinds.
• The auction comes after the 5-/10-/20-Year fly has pulled back from its recent highs, although some may look to establish 10-Year longs vs. 30s in an attempt to fade some of the pre-BoJ flattening, especially given the passage of the end of the previous Japanese FY (although we should note that that particular spread has steepened by 5bp from its recent flats).
• The 10-Year sector's superior carry and roll (indeed it continues to offer the most attractive carry & roll proposition on the curve) may provide at least some offset to any headwinds.
• Results due at 0435BST/1235JST.