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Poor Results Again For 10-Year JGB Supply

JGBS AUCTION

The 10-year JGB auction showed poor demand metrics. The low price failed to meet wider expectations (which stood at 100.02, per the BBG dealer poll), the tail lengthened, and the cover ratio only improved slightly to 2.904x from 2.823x at December’s auction. It is worth noting that December’s cover was the lowest seen at a 10-year auction since 2021.

  • As highlighted in the auction preview, today’s 10-year auction took place with an outright yield that was approximately 10bps lower than the early December offering. Moreover, the 2/10 yield curve was 5bps flatter and the relative affordability of 10-year JGBs compared to futures, as indicated by the spread between the 7- and 10-year JGBs, was around its lowest point since early October.
  • Not even the current bullish sentiment towards long-end global bonds was sufficient to support the bid at today’s auction.
  • In early Tokyo afternoon trade, the cash 10-year JGB is around 1.0bp cheaper than lunch levels.
  • JGB futures are lower in afternoon dealings, +10 compared to settlement levels, after entering the lunch break at +20.
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