Poor Digestion of 30-year Supply

30-year supply sees poor digestion as the low price fails to meet dealer expectations (which stood at 91.0, per the BBG poll) and the cover ratio at 3.461x ticked down versus 3.504x at last month’s auction. The auction tail was also significantly longer than the previous auction. Barring the July result, the tail was the longest since Apr’20.

• It appears the allure of almost the highest outright yield and the steepest 2/30 curve since 2014 was able to facilitate a successful takedown of this month's 30-year auction.
• Today’s result is consistent with other recent JGB auctions and appears to suggest that local investors seek higher yields and/or more time to assess the new YCC framework and the BoJ's policy outlook before significantly increasing their allocations to the JGB market.
• Interestingly, JGB futures have initially gapped higher into positive territory for the first time today after the lunch break, +2 compared to settlement levels.
• The 30-year JGB has initially richened 0.5bp in post-auction trade.