PREVIEW: 10-Year JGB Supply Due

The Japanese MOF will today sell Y2.7tn of 10-Year JGBs, re-opening JB#369. The MOF last sold 10-Year debt on 5 January, the auction drew cover of 4.764x at an average yield of 0.500%, average price of 100.00, high yield of 0.500%, low price of 100.00, with 28.1152% of bids allotted at the high yield.

• The 0.500% coupon and moderation in pressure on the BoJ’s YCC settings, coupled with last year’s well-documented repatriation of Japanese investor capital and 10-Year yields operating just below the BoJ’s YCC upper boundary, should result in smooth digestion of today’s supply.
• Still, continued uncertainty re: BoJ policy (particularly post-Kuroda) and the structural richness of 10s on the curve that the BoJ’s YCC settings is promoting (albeit off extremes after the surprise December YCC tweak) will probably stop demand from being quite as firm as it otherwise could be.
• Results due at 0335GMT/1235JST.