Poor Digestion of 30-Year Supply, Longest Tail Since June’19

30-year supply sees poor digestion as the low price fails to meet dealer expectations (which stood at 102.10, per the BBG poll) and the cover ratio at 3.059x ticked down versus 3.461x at last month’s auction. The auction tail was also significantly longer than the previous auction. The tail was the longest since June 2019.

• It appears the allure of the highest outright yield and the steepest 2/30 curve since 2014 was unable 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 the dynamic of local investors shifting capital away from foreign markets toward longer-dated JGBs has shifted somewhat following the BOJ’s YCC adjustment in late July and the push higher in longer-dated global bond yields.
• JGB futures initially gapped lower after the lunch break but have subsequently unwound part of that weakness.
• The 30-year JGB has initially cheapened 1.5bps in post-auction trade.