Liquidity Enhancement Auction For OTR 15.5-39.9-Year JGBs

The Japanese Ministry of Finance (MOF) will today sell Y500bn of JGBs with 15.5-39.9 years until maturity in a liquidity enhancement auction. JB#1-15, #30-78 & #168-184 will be on offer.

• The previous liquidity enhancement auction covering these maturities was held on 13 June 2023. The auction was covered by 2.873x at an average spread of -0.019%, and a high spread of -0.017% was registered, with 48.7044% of the bids allotted at the high spread.
• June’s offering saw stronger demand, with the cover ratio higher than the April LEP. Spreads observed at the auction were also lower than that seen in April with the average accepted spread -0.019% versus -0.013% prior.
• While this event presents an opportunity to access liquidity, thereby expected to generate a minimum level of demand, it's crucial to acknowledge that the prior auction aimed at enhancing liquidity for these maturities took place prior to the BoJ’s recent yield curve control adjustment.
• Given this perspective, the cheapening observed within the 15.5-39.9-year bucket since the June 13 auction might not lead to heightened interest in acquiring bonds within these specific sections of the yield curve. This parallels the situation seen earlier in the week with the LEP for 5-15.5-year JGBs.
• Results are due at 0435 BST/ 1235 JST.