JGBS: Bear-Steepener As Poor 40Y Auction Weighs

JGB futures are weaker and not far from lows, -14 compared to settlement levels, on a data-light Tokyo session.

• The issuance of 40-year bonds today encountered a poor reception, with the actual high yield overshooting dealer expectations. As per the BBG poll, the anticipated yield was projected at 2.54% versus the realised yield of 2.55%.
• Additionally, the cover ratio was lower at 2.2364x versus 2.5798x at the prior outing.
• As noted in the auction preview, today’s yield was approximately 30bps higher than the prior auction, with the 20/40-year yield curve slightly steeper and near its steepest level in the past 12 months.
• Given these factors, the auction outcome was viewed as disappointing.
• Cash US tsys are flat to 1bp richer, with a steepening bias in today’s Asia-Pac session.
• Cash JGBs are flat to 2bps cheaper across benchmarks beyond the 1-year, with the 40-year leading. The benchmark 40-year yield is 2.1bps higher at 2.64%.
• Swap rates are 1bp lower to 2bps higher, with the belly outperforming.
• Tomorrow, the local calendar will see Weekly International Investment Flow data alongside BOJ Rinban operations covering 3-25-year and Inflation-Indexed JGBs.