PREVIEW: 10-Year JGB Supply Due

The Japanese MOF will today sell Y2.7tn of 10-Year JGBs re-opening JB#366. The MOF last sold 10-Year debt on May 10, the auction drew cover of 5.742x at an average yield of 0.245%, average price of 99.56, high yield of 0.248%, low price of 99.53, with 25.2561% of bids allotted at the high yield.

• The proximity of the line to the upper end of the BoJ’s permitted -/+0.25% trading band (last ~0.24%), coupled with the Bank’s insistence that it will stick with its current YCC settings, should be enough to ensure smooth passage of supply when it comes to today’s auction.
• Steepener interest may also generate demand at auction, even with the likes of the 10-/20, 10-/30- and 10-/40-Year curves running close to their respective multi-year steeps. Offshore bond market gyrations and the lack of relative BoJ control re: the longer end of the curve are potential catalysts for demand when it comes to such strategies.
• Also note that only 20s provide a more attractive carry and rolldown proposition when it comes to benchmark JGBs.
• Results due at 0435GMT/1235JST.