PREVIEW: 10-Year JGB Supply Due

The Japanese MOF will today sell Y2.7tn of 10-Year JGBs, re-opening JB#368. The MOF last sold 10-Year debt on 1 November, the auction drew cover of 5.243x at an average yield of 0.248%, average price of 99.53, high yield of 0.249%, low price of 99.52, with 42.7523% of bids allotted at the high yield.

• The BoJ’s YCC scheme continues to promote structural richness of 10s on the curve, although those looking for the BoJ to stand pat for the foreseeable future, in line with its current forward guidance, could use the auction to build longs owing to the proximity of outright yields to the upper boundary provided by the BoJ’s YCC scheme.
• Short covering-related demand may also support takedown.
• The impending futures roll creates some minor hedging complications, which could provide very modest demand headwinds.
• Results due at 0335GMT/1235JST.