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PREVIEW - 2-Year JGB Auction Due

JGBS AUCTION

The Japanese Ministry of Finance (MOF) will today sell Y2.9tn of 2-Year JGBs, re-opening JB#452. The MOF last sold 2-year debt on 28 August 2023, the auction drew cover of 3.206x at an average yield of 0.011%, an average price of 99.987, a high yield of 0.020%, a low price of 99.970, with 91.2993% of bids allotted at the high yield.

  • Last month's 2-year auction marked the first offering of 2-year bonds following the BOJ's adjustment to yield curve control. Unfortunately, it experienced lacklustre demand, with the low price failing to meet dealer expectations and the cover ratio plummeting to its lowest level for a 2-year auction since 2010.
  • However, today's auction occurs amidst more positive demand indicators for 5-, 20-, and 40-year JGB offerings. This suggests that current outright yields might finally be offering suitable compensation for both BOJ uncertainties and uncertainties within the bond market.
  • Given these factors, it will be intriguing to observe whether the relatively higher 2-year yield, the highest since January's 2-year issuance, will prove sufficient to generate demand in today's auction.
  • Worth noting is the significant steepening of the 2/5 JGB yield curve over the past month, reaching its most pronounced point since January.
  • Results are due at 0435 BST/1235 JST.
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