20-Year JGB Supply Goes Poorly

Woeful demand at the latest round of 20-Year JGB supply, with a wide tail and a low price that was comfortably below general expectations (which stood at 105.00, per the BBG dealer poll). That came alongside a depressed cover ratio, which printed at the lowest level seen at a 20-Year JGB auction since September’s offering. A reminder that September’s cover ratio represents the lowest level seen at a 20-Year JGB auction since ’12. The recent outright richening, ongoing market vol. and uncertainty re: BoJ Rinban purchases (all of which were factors flagged in our auction preview) provided the major headwinds for takedown. JGB futures are little changed vs. pre-auction levels, while 20-Year JGB yields sit a little over 1bp cheaper vs. pre-auction levels after moving back from knee-jerk extremes post-supply. There hasn’t been much movement in the 10/-20/-30-Year butterfly when compared to pre-lunch levels.