PREVIEW: 10-Year JGBi Supply Due

The Japanese MOF will today sell Y200bn of 10-Year JGBis opening JB#27. The MOF last sold 10-Year inflation-indexed debt on February 8, the auction drew cover of 4.198x at a high yield of -0.388%, low price of 103.70, with 48.3443% of bids allotted at the high yield.

• Note that in spite of the presence of the well-documented global inflationary pressures, Japanese 10-Year breakevens have failed to move stably above 1.00%, showing a lack of faith on the part of markets re: the BoJ getting anywhere near the achievement of its inflationary goal, at least in a stable manner (indeed, the BoJ has conceded as much, stressing that the current inflationary impulse is a result of cost pull, not demand push, inflation). 5-Year/5-Year inflation swaps tell a similar story, last hovering around 0.75% after peaking just below 0.90% earlier this month.
• Still, the aforementioned inflationary worry should provide a baseline level of demand at today’s auction.
• Results due at 0435BST/1235JST.