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Expectations Met At 2-Year JGB Auction, Cover Just Above Lowest Since 2010

JGBS AUCTION

The 2-year bond supply has demonstrated sufficient demand, as the offered price met dealer expectations, which had been projected at 99.91, as per the BBG poll.

  • The cover ratio saw a slight increase, reaching 3.273x compared to the 3.206x recorded in the previous month's auction. However, it's worth noting that the cover ratio observed in August marked the lowest for a 2-year auction since 2010.
  • It's essential to recall that the August 2-year JGB auction marked the first issuance of 2-year bonds since the BOJ made adjustments to its yield curve control (YCC) strategy.
  • Considering that today's auction takes place amidst more positive demand indicators for 5-, 20-, and 40-year JGB offerings, the results might be viewed as somewhat lacklustre, especially given that the outright yield was the highest since January.
  • The notable steepening of the 2/5 JGB yield curve over the past month, reaching its most pronounced point since January, appears to have influenced demand compared to the recent 5-year auction.
  • Following the 2-year JGB auction, there was a slight initial uptick in post-auction trade, although this was subsequently reversed. JGB futures are steady in early afternoon trading.
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