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PREVIEW - 20-Year JGB Auction Due

JGBS AUCTION

The Japanese Ministry of Finance (MoF) will today sell Y1.0tn of 20-Year JGBs. The MoF last sold 20-year debt on 16 May 2024, the auction drew cover of 3.6500x at an average yield of 1.734%, an average price of 98.01, a high yield of 1.742%, a low price of 97.9, with 24.4913% of bids allotted at the high yield.

  • Today's issuance of 20-year JGBs comes after May’s auction showed solid demand metrics. The cover ratio increased, and the auction tail shortened materially.
  • Today's auction also comes on the heels of a strong 10-year JGB auction in June. The low price beat wider expectations, the tail shortened, and the cover ratio increased versus May’s auction. Like 10-year supply, June’s 30-year auction also displayed a more optimistic tone for a JGB market that had experienced mounting pressure since mid-December, fueled by expectations of policy tightening from the BoJ.
  • The current auction presents an outright yield 10bps higher than the level observed at May’s outing and only 10bps lower than the cycle high set in late May.
  • Also on the positive side, today's auction occurs amidst more optimistic sentiment towards long-end global bonds.
  • The 10/20 yield curve and the 20-year JGB relative to the 10/20/30 butterfly are at similar levels to the mid-May auction.
  • Against this backdrop, it will be intriguing to observe whether today’s supply follows the lead set by June’s 10-year auction.
  • Results are due at 0435 BST / 1235 JST.
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