JGBS AUCTION: Poor 10Y Auction

The 10-year JGB auction showed weaker results, with the low price falling short of expectations (99.10 per the Bloomberg dealer poll). The cover ratio declined to 3.133x from last month’s 3.529x, and the tail lengthened to 0.04 from 0.02.

• This was despite the auction offering an outright yield 10-15bps higher than last month’s level and just 10bps below July's cyclical high.
• Additionally, the 2s/10s yield curve was about 5bps steeper than last month and 5-10bps steeper than its recent low, which marked the flattest point since mid-2023.
• Weak sentiment toward global long-end bonds impacted today’s auction, as a post-U.S. election sell-off in U.S. Treasuries drove up longer-dated yields, with the U.S. 10-year yield now 80-85bps above its September low.
• In early afternoon Tokyo trading, the cash 10-year JGB is around 0.5bps cheaper, and JGB futures are trading at session lows, down 24 ticks from settlement levels.