PREVIEW: 20-Year JGB Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGBs, re-opening #JB179. The MOF last sold 20-Year debt on January 14, the auction drew cover of 3.179x at an average yield of 0.532%, average price of 99.41, high yield of 0.536%, low price of 99.35, with 94.8003% of bids allotted at the high yield.

• While the recent outright yield cheapening points to a residual amount of demand at a minimum (super-long end yields have registered multi-year highs session after session in recent days), given that 20-Year JGB yields sit at the highest level observed since ’16.
• The effective pegging of the 10-Year point on the curve means that the 10-/20-Year yield spread sits at multi-year steeps, while 20s sit at multi-year cheaps when looking to the 10-/20-/30-Year JGB butterfly.
• Still, the recent run of pressure on super-long paper has seemingly come against the backdrop of a hiatus of buyers, which could ultimately cap demand at today’s auction, as questions re: the offshore monetary tightening impulse continuing to dominate participants’ minds.
• Results due at 0335GMT/1235JST.