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5-15.5 Year Liquidity Enhancement Auction Sees Cover Dip, Yield Spreads More Encouraging

JGBS

The latest liquidity enhancement auction covering off-the-run 5-15.5 Year JGBs saw firm pricing, with spreads firming vs. the previous auction (likely linked to demand for the CtD bond of JBU2 futures, as we flagged in our auction preview), while the spread tail narrowed a little. Elsewhere, the cover ratio came in at 3.66x, sharply lower vs. the high print observed in the last auction (6.15x), with short covering already well underway in the space after June’s BoJ meeting/defence of YCC (likely limiting wider demand at today’s auction). Note that this metric was below the six-auction average of 4.40x. There hasn’t been any significant moves in cash JGBs post-auction, with the same holding true for JGB futures.

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The latest liquidity enhancement auction covering off-the-run 5-15.5 Year JGBs saw firm pricing, with spreads firming vs. the previous auction (likely linked to demand for the CtD bond of JBU2 futures, as we flagged in our auction preview), while the spread tail narrowed a little. Elsewhere, the cover ratio came in at 3.66x, sharply lower vs. the high print observed in the last auction (6.15x), with short covering already well underway in the space after June’s BoJ meeting/defence of YCC (likely limiting wider demand at today’s auction). Note that this metric was below the six-auction average of 4.40x. There hasn’t been any significant moves in cash JGBs post-auction, with the same holding true for JGB futures.