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Less Demand Seen At Liquidity Enhancement Auction For OTR 5-15.5-Year JGBs

JGBS

Less demand was seen at the latest liquidity enhancement auction covering off-the-run 5-15.5 Year JGBs, compared to the previous auction covering these maturities (May 19). Today’s cover ratio was 3.100x versus 3.716x prior. Today’s cover ratio was the lowest since April.

  • Spreads observed at the auction were however lower than that seen last time out although it remained in positive territory. The average accepted spread was +0.002% versus +0.006% previously.
  • While this event provides a liquidity accessing opportunity and therefore tends to generate at least a baseline level of demand, the cheapening in the 7-15-year zone since the May 19 auction, as outlined in the auction preview, failed to entice stronger demand for paper in those areas of the curve. The richening in the 5-year zone since the last auction could be responsible for the waning bid today.
  • JGB futures are a little cheaper along with the 5-year zone, with the 10- and 15-year JGB yields little changed post-auction.
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