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2-Year Auction Goes Smoothly; Cover Rebounds

JGBS

The latest round of 2-Year JGB supply went well, with the low price printing above broader expectations (which stood at 100.145 as per the BBG dealer poll), while the price tail narrowed. The cover ratio came in at 4.33x, a little below the six-auction average of 4.57x, but bettering the 3.81x observed at the previous auction. The BoJ’s on-hold monetary policy stance likely contributed to the smooth takedown, adding to demand from offshore investors on the lookout for attractive FX-hedged yield pickups on offer, countering negatives from a move away from cycle cheaps (on the BoJ’s decision to stand pat), as well as the steepness of the JGB curve.

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