Liquidity Enhancement Auction For OTR 5-15.5-Year JGBs

The Japanese Ministry of Finance (MOF) will today sell Y500bn of JGBs with 5-15.5 years until maturity in a liquidity enhancement auction. JB#1-29, #105-167 & #352-370 will be on offer.

• The previous liquidity enhancement auction covering these maturities was held on 21 July 2023. The auction was covered by 4.237x at an average spread of +0.005%, and a high spread of +0.011% was registered, with 8.1818% of the bids allotted at the high spread.
• Last month’s offering saw stronger demand, with the cover ratio significantly higher than the June LEP. Spreads observed at the auction were however slightly higher than that seen in June with the average accepted spread +0.005% versus +0.002% 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 (YCC) adjustment.
• In light of this, the cheapening in the 5-15-year zone since the July 21 auction may not result in an increased demand for bonds within these segments of the yield curve.
• Results are due at 0435 BST/ 1235 JST.