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40-year Auction Smoothly Digested

JGBS AUCTION

The issuance of 40-year bonds today encountered a solid reception, with the actual high yield undershooting dealer expectations. The anticipated yield, as per the BBG poll, was projected at 1.925% versus the realised yield of 1.905%.

  • Adding to the solid response, the cover ratio witnessed an increase, rising to 2.487x from 2.148x observed in the late January auction. This outcome comes after two consecutive declines in cover.
  • As highlighted in the auction preview, today's auction followed poor demand metrics at the 20- and 30-year JGB auctions held in March. Both auctions experienced a downtick in their cover ratios and the respective low prices fell short of dealer expectations.
  • The stronger bid likely reflected the fact that the outright yield was approximately 15-20bps higher compared to the late January offering.
  • The 40-year bond is around 1-2bps richer in early afternoon trading, reflecting a positive response to the auction outcome. JGB futures are also slightly stronger in post-auction trade.
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