Issuance Matters Eyed

JGB futures added 1 tick overnight, recovering from worst levels of the session alongside U.S. Tsys. Note that the contract’s Wednesday Tokyo low held when it was tested during post-Tokyo trade.

• RTRS sources have noted that “Japan plans to issue Y4.2tn of 40-Year JGBS, a 17% increase that comes even as the government plans to cut its bond issuance overall.” The sources noted that the move reflects “solid demand from life insurers at the long end of the yield curve.” The report notes that the increased issuance of 40-Year paper will come via a Y100bn uptick in auction size on a bi-monthly basis, as opposed to more frequent issuance. The piece suggested that total JGB issuance for the next FY will be somewhere in the region of Y200tn, down ~Y20tn vs. the current FY. There will also be a modest uptick (~Y600bn) in liquidity enhancement auctions during the next FY.
• An address from BoJ Governor Kuroda and a liquidity enhancement auction covering off-the-run 15.5- to 39-Year JGBs headline the Japanese docket on Thursday.