Bank Of America Suggest That The BoJ May Need To Up Its JGB & TB Purchases

Bank of America Research note that "the government has implemented emergency economic measures to counter the effects of the COVID-19 outbreak, and JGB issuance is set to rise by a huge amount from the initial budget level to fund those measures. JGB issuance has increased in July, but auction results have been favorable so far due to short cover demand and dip buying. However, it might be difficult to find investors capable of absorbing the additional issuance on a constant monthly basis. If the Bank of Japan (BoJ) does not increase its JGB purchases, there is a substantial risk that supply-demand will ease. That also applies to TBs, which have seen a big issuance increase. The TB market has been underpinned by foreign investors, but the BoJ's presence in that market looks set to rise."