30-Year Supply Passes Smoothly

30-Year supply sees smooth enough digestion as the low-price tops dealer expectations (which stood at 100.80, per the BBG poll), while the price tailed narrowed from the multi-month wides witnessed last time out as the cover ratio ticked higher, with the latter moving above the 6-auction average (which stood at 3.10x).

• The recent cheapening on the likes of the 20-/30-/40-Year butterfly (although 30s still remain rich over a longer horizon) and allure of new paper probably aided takedown, while the prospect for repatriation of capital deployed offshore (although the outlook for deployment is highly uncertain, given the uncertainty surrounding BoJ policy trajectory in the coming months) may have provided some incremental support.
• Still, the cover ratio wasn’t particularly firm, with the flatness of the curve and recent richening likely leaving some on the sidelines (along with the aforementioned uncertainty re: BoJ policy trajectory).
• JGB futures add to early afternoon gains in the wake of the auction, before fading from best levels, while 30s richen by 0.5bp from pre-auction levels, firming a touch on the 20-/30-/40-Year butterfly.