PREVIEW: 20-Year JGB Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGB's re-opening #JB178. The MOF last sold 20-Year debt on October 19, the auction drew cover of 2.693x at an average yield of 0.471%, average price of 100.51, high yield of 0.475%, low price of 100.45, with 81.1162% of bids allotted at the high yield.

• The 10-/20-/30-Year butterfly hovers around the widest levels witnessed since March, which may result in demand at auction. One issue that could limit demand is any worry re: heavier relative 20-Year issuance when it comes to financing the incoming fiscal support package. The carry & roll on such a position is only marginally positive. The supply risks may also dissuade outright longs, even with outright 20s hovering within touching distance of multi-month cheaps.
• Some desks have flagged the potential to enter long 20s via ASW positions, suggesting that any uptick in yields on the back of an increased issuance burden may be countered by foreigner investor payside flow, which could limit any headwinds for such a position. The carry story here is also a lot more positive than the aforementioned 10-/20-/30-Year butterfly.
• Results due at 0335GMT/1235JST.