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Poor 10Y Auction

JGBS AUCTION

The 10-year JGB auction saw the low price fail to meet wider expectations (which stood at 101.66, per the BBG dealer poll). Moreover, the cover ratio fell to 2.975x from 3.277x at July’s auction and the tail exploded to 0.5 from 0.02 in July.

  • The current 10-year auction was taking place with an outright yield around 25bps lower than the July auction, following a significant decline over the past week due to global recessionary concerns.
  • Moreover, the 2/10 yield curve was approximately 15bps flatter than it was during the July auction after the recent risk-induced flattening.
  • It was also noteworthy that the relative affordability of 10-year JGBs compared to futures, as indicated by the spread between the 7- and 10-year JGBs, was less attractive than it was in July.
  • However, today’s auction did occur with sentiment towards global long-end bonds at the most favourable level this year.
  • In early Tokyo afternoon trading, the cash 10-year JGB is around 5bps cheaper, with JGB futures near session cheaps.

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