AUCTION PREVIEW: 2-Year JGB Supply Due

The Japanese MOF will today sell Y2.8tn of 2-Year JGBs opening JB#437. The MOF last sold 2-Year debt on May 31, the auction drew cover of 5.426x at an average yield of -0.058%, average price of 100.127, high yield of -0.054%, low price of 100.120, with 32.8287% of bids allotted at the high yield.

• In outright terms, 2-Year JGB yields are a little closer to the base of the range observed over the last few months, although the fact that pockets of the domestic investment community have capital to put to work may support takedown at today’s auction, even if worry re: BoJ recalibration keeps the majority of the international investment community on the sidelines.
• Participants looking for some form of policy tweak from the BoJ may look to establish longs as part of a steepener trade vs. 10+-Year paper, although we wouldn’t expect anything in the way of notable demand to come from here given current curve levels and the BoJ’s continued defence of its current YCC parameters.
• Results due at 0435BST/1235JST.