PREVIEW - 20-Year JGB Auction Due

The Japanese Ministry of Finance (MoF) will today sell Y1.2tn of 20-Year JGBs. The MoF last sold 20-year debt on 18 January 2024, the auction drew cover of 3.126x at an average yield of 1.383%, an average price of 98.69, a high yield of 1.399%, a low price of 98.45, with 75.6386% of bids allotted at the high yield.

• Today's issuance of 20-year JGBs comes after January’s auction showed mixed results. The low-price failed to meet dealer expectations but the cover ratio increased to 3.126x from 2.584x at December’s auction. The auction tail also shortened materially.
• Today's auction also follows on the heels of solid results at February’s 10- and 30-year JGB supply.
• The current auction presents an outright yield that is around 15bps higher than the level observed in January but approximately 25bps lower than the cycle high set in late October. While an increase in demand might be expected in isolation, it is essential to consider the recent deterioration in sentiment towards longer-dated bonds globally.
• The bid tone today is also likely to be impacted by growing speculation that the BoJ is on track to end negative interest rates in coming months despite the country’s economy falling into recession. Today’s Reuters report cited unidentified people familiar with the bank’s thinking.
• The 10/20 yield curve and the 20-year JGB relative to the 10/20/30 butterfly are at similar levels to the mid-January auction.
• Results are due at 0335 GMT / 1235 JST.