Firmer & Flatter, Even With Questionable 20-Year Supply Apparent

Spill over from Wednesday’s U.S. Tsy bid ultimately provided support to JGBs in early Tokyo dealing, with the Aussie-bond led bid in core global FI markets leading the space higher during the Tokyo afternoon.

• JGB futures are +21 late in the Tokyo day, while cash JGBs run 0.5-4.5bp richer across the curve, with the long end leading.
• It wasn’t all one-way traffic for the long end. The latest round of 20-Year JGB supply wasn’t well received, with the low price missing wider dealer expectations and tailing widening vs. the previous auction, although the cover ratio did nudge higher, albeit from a low base, holding below the 6-auction average in the process. This provided some limited headwinds for longer dated paper during the early rounds of afternoon trad before the aforementioned bid dominated.
• Elsewhere, fiscal support initiatives from the parties that form the ruling Japanese coalition were eyed but didn’t provide much in the way of market impact.