Little Impact From Liquidity Enhancement Auction

Solid demand at the latest liquidity enhancement auction covering off-the run 5- to 15.5 Year JGBs, with the cheapening in the time since the previous auctioning providing a more enticing level for outright longs to enter/existing shorts to cover (the cover ratio hit the highest level seen since December’s 5- to 15.5-Year liquidity enhancement offering). Spreads observed at the auction were at a much more palatable level than that seen last time out, given the prevailing market environment, but still resided in negative territory. There was little in the way of meaningful impact when it came to JGB futures pricing, nor in cash 7-/10-Year JGB trade, with any spill over from U.S. Tsy futures edging away from session bests likely countering the auction impetus.