Auction Dynamics Lend Support

Afternoon trade saw a bid creep into the JGB space, with futures moving to best levels of the day in the wake of a strong 5-Year JGB auction, last +5, just off best levels, with the belly outperforming in cash trade post-auction.

• In more detail, the allure of new paper and the BoJ's policy continuation seemingly facilitated solid takedown at the latest 5-Year auction, outweighing the apparent flat relative value prospects. The tail tightened at the margin, with the cover ratio jumping and low price topping dealer expectations (which sat at 100.92, per the BBG dealer poll).
• Elsewhere, BoJ Governor Kuroda pointed to a moderate economic recovery in Japan, as he reiterated his view on monetary policy in front of BoJ branch managers. The Bank then upgraded its economic assessment of 8 of its 9 Japanese geographical regions.
• Wage and household spending data, in addition to the latest round of BoJ Rinban ops, headline the local docket on Friday.