PREVIEW: 2-Year JGB Supply Due

The Japanese MOF will today sell Y3.0tn of 2-Year JGB's opening JB#429. The MOF last sold 2-Year debt on August 31, the auction drew cover of 4.504x at an average yield of -0.129%, average price of 100.269, high yield of -0.127%, low price of 100.265, with 43.1236% of bids allotted at the high yield.

• 2-Year yields remain well anchored within the recently observed range, although the recent, albeit modest, steepening of the likes of the 2-/5- and 2-/10-Year yield curves, coupled with the grater carry and roll proposition of 5s and 10s may provide some headwinds ahead of supply.
• Elsewhere, there is some speculation that the Q4 Rinban plan (released after hours today) may see the BoJ cut the size of its Rinban purchases covering JGBs out to 10s, which may be another headwind for this particular auction.
• The recent widening of 2-Year swap spreads may present another incremental issue for supply.
• Still, the well anchored nature of BoJ monetary policy settings should underpin demand and result in a smooth auction.
• Results due at 0435BST/1235JST.