PREVIEW - 10-Year JGB Auction Due

The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-Year JGBs. The MoF last sold 10-year debt on 4 June 2024, the auction drew cover of 3.662x at an average yield of 1.048%, an average price of 97.79, a high yield of 1.051%, a low price of 97.77, with 70.1065% of bids allotted at the high yield.

• The auction held last month went well, with the low price beating wider expectations, the tail shortening and the cover ratio rising to 3.662x from 3.151x at May’s auction.
• The current 10-year auction is taking place with an outright yield just off its cycle peak of 1.101%.
• The 2/10 yield curve is around 5bps steeper than the level of the June auction. However, it is still around 10bps flatter than the cyclical peak set in late October last year.
• It's also notable that the relative affordability of 10-year JGBs compared to futures, as indicated by the spread between the 7- and 10-year JGBs, is currently around its highest point since 2013.
• However, today's auction occurs with long-end global bonds having been under considerable pressure from a paring of global policy easing expectations.
• Against this backdrop, it will be intriguing to observe whether the current 10-year yield, will prove sufficient to generate demand at today's auction.
• Results are due at 0435 BST / 1235 JT.