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PREVIEW: 2-Year JGB Supply Due

JGBS AUCTION

The Japanese Ministry of Finance (MOF) will today sell Y2.9tn of 2-Year JGBs, opening JB#448. The MOF last sold 2-year debt on 30-March 2023, the auction drew cover of 3.892x at an average yield of -0.063%, an average price of 100.136, a high yield of -0.057%, a low price of 100.125, with 6.3374% of bids allotted at the high yield.

  • The March auction saw the cover ratio below the 6-auction average. Uncertainty regarding the outlook for BoJ monetary policy settings potentially provided a limiting factor for demand.
  • With Governor Ueda’s comments over the past week likely reassuring the market that the BoJ considers it appropriate to maintain its ultra-easy monetary policy today's auction may see a stronger bid. Still uncertainty re: BoJ policy in the month ahead will likely cap demand.
  • The recent string of announcements from local participants regarding portfolio adjustments out of hedged offshore debt into Yen bond holdings may also prove to be a supportive factor.
  • Outright 2s operate in negative yield territory, but are off of recent richest levels (probably neutral for demand on net), while the 2-/5-Year curve sits in the middle of the YtD range (once again, probably neyutral for demand).
  • Results are due at 0435BST/1235JST.
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