PREVIEW: 2-Year JGB Supply Due

The Japanese MOF will today sell Y2.8tn of 2-Year JGBs opening JB#435. The MOF last sold 2-Year debt on February 25, the auction drew cover of 4.559x at an average yield of -0.020%, average price of 100.051, high yield of -0.017%, low price of 100.045, with 0.8465% of bids allotted at the high yield.

• The BoJ’s reaffirmation of its dovish stance through the defence of the upper end of its permitted 10-Year JGB yield trading band should mean that this auction passes smoothly enough.
• Meanwhile, the proximity to the end of the Japanese FY should facilitate domestic demand, while cross-currency basis-related yield pickup should entice certain quarters of the offshore investor base. However, the aforementioned proximity to FY end and may deter some offshore investors, given their propensity to sell Japanese paper at this time of year (as evidenced by the latest round of Japanese weekly international security flow data)
• Results due at 0435GMT/1235JST.