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PREVIEW - 20-Year JGB Auction Due

JGBS AUCTION

The Japanese Ministry of Finance (MoF) will today sell Y1.2tn of 20-Year JGBs. The MoF last sold 20-year debt on 14 December 2023, the auction drew cover of 2.584x at an average yield of 1.414%, an average price of 101.32, a high yield of 1.467%, a low price of 100.50, with 36.0220% of bids allotted at the high yield.

  • Today's issuance of 20-year JGBs follows a poor December auction, marked by a low-price print below dealer expectations, a decreased cover ratio compared to November, and a significant lengthening in the tail.
  • Today’s auction also comes on the heels of suboptimal results at January’s 5-, 10- and 30-year JGB supply.
  • The current auction presents an outright yield of around 10bps lower than the level observed in December and approximately 40bps lower than the cycle high set in late October. While a decrease in demand might be expected in isolation, it is essential to consider the improved sentiment towards longer-dated bonds globally since early November.
  • Supporting the bid tone today is the growing optimism surrounding the BoJ’s policy outcome. Ahead of next Tuesday’s policy decision, BoJ officials are showing little urgency in scrapping the world’s last negative interest rate this month, as they await sufficient evidence of wage growth to support sustainable inflation.
  • The 10/20 yield curve is slightly flatter than last month’s auction. More noteworthy however is the fact that the 20-year JGB relative to the 10/20/30 butterfly is at a significantly richer level than last month's outing.
  • Results are due at 0335 GMT / 1235 JST.
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