Curve Steepens Little Around 20-Year Supply Dynamics

JGBs have been subjected to some light steepening pressure, after the super-long saw some modest concession into 20-Year JGB supply. Cash JGBs run 0.5bp richer to 1.5bp cheaper ahead of the close, twist steepening.

• The auction saw the low price miss wider dealer expectations, although the cover ratio ticked higher and the tail width moderated from that seen in September. We remind you that last month’s auction was particularly weak, meaning that last month’s cover ratio (which was the lowest observed at a 20-Year auction since ’12) and particularly wide tail provide very low comparison bars. This month’s cover ratio was pretty much bang in line with the 6-auction average.
• The super-long end failed to rally, even as JGB futures caught a light bid on the back of the previously covered speculation re: a delay to the BoE’s implementation of QT. JGB futures trade +6 into the bell, sticking to a narrow range within the boundaries established during the overnight session.
• BoJ Governor Kuroda stressed that JPY weakness is becoming a factor re: inflation (this comes after various reports, including one from our own policy team, flagged an incoming upside adjustment to the BoJ’s inflation projection for the current FY).
• An address from BoJ’s Adachi headlines tomorrow’s domestic docket.