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PREVIEW - 2-Year JGB Auction Due

JGBS AUCTION
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The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 2-Year JGBs. The MoF last sold 2-year debt on 23 April 2024, the auction drew cover of 3.481x at an average yield of 0.303%, an average price of 99.994, a high yield of 0.307%, a low price of 99.985, with 65.7448% of bids allotted at the high yield.

  • Last month's 2-year auction demonstrated mixed demand metrics, as the low price met dealer expectations, but the cover ratio declined to 3.481x from 4.072x in March. The auction tail was unchanged from last month.
  • It is important to note that the April auction occurred in the run-up to the most recent BoJ Policy Decision. While no policy adjustment was anticipated at that meeting, a growing number of economists foresaw the possibility of the BoJ implementing another rate hike in October, with many highlighting July as a potential earlier timeframe.
  • Today's auction occurs with an outright yield at its cyclical peak, the highest level since 2009.
  • The yield curve is steeper than the April outing, with the 2/5 and 2/10 curves showing increases of 5 and 10bps respectively.
  • It is also noteworthy that today's supply follows a 5-year offering earlier this month that showed mixed demand metrics.
  • That outcome, along with May’s weak 10-year auction, reversed the optimistic tone for the new fiscal year set by the April auctions. Expectations of further policy tightening from the BoJ continue weigh on the market.
  • Against this backdrop, it will be intriguing to observe whether the current 2-year yield, will prove sufficient to generate demand in today's auction.
  • Results are due at 0435 BST / 1235 JST.
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The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 2-Year JGBs. The MoF last sold 2-year debt on 23 April 2024, the auction drew cover of 3.481x at an average yield of 0.303%, an average price of 99.994, a high yield of 0.307%, a low price of 99.985, with 65.7448% of bids allotted at the high yield.

  • Last month's 2-year auction demonstrated mixed demand metrics, as the low price met dealer expectations, but the cover ratio declined to 3.481x from 4.072x in March. The auction tail was unchanged from last month.
  • It is important to note that the April auction occurred in the run-up to the most recent BoJ Policy Decision. While no policy adjustment was anticipated at that meeting, a growing number of economists foresaw the possibility of the BoJ implementing another rate hike in October, with many highlighting July as a potential earlier timeframe.
  • Today's auction occurs with an outright yield at its cyclical peak, the highest level since 2009.
  • The yield curve is steeper than the April outing, with the 2/5 and 2/10 curves showing increases of 5 and 10bps respectively.
  • It is also noteworthy that today's supply follows a 5-year offering earlier this month that showed mixed demand metrics.
  • That outcome, along with May’s weak 10-year auction, reversed the optimistic tone for the new fiscal year set by the April auctions. Expectations of further policy tightening from the BoJ continue weigh on the market.
  • Against this backdrop, it will be intriguing to observe whether the current 2-year yield, will prove sufficient to generate demand in today's auction.
  • Results are due at 0435 BST / 1235 JST.