PREVIEW: 20-Year JGB Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGBs opening JB#180. The MOF last sold 20-Year debt on March 10, the auction drew cover of 2.928x at an average yield of 0.644%, average price of 97.47, high yield of 0.648%, low price of 97.40, with 97.0087% of bids allotted at the high yield.

• Continued market volatility will likely prevent today’s auction from being as strong as it otherwise could be, with participants likely to remain wary of the threat of offshore market gyrations, given the lack of relative BoJ control over this zone of the curve.
• Still, the recent stabilisation and move away from multi-year cheaps will mean that outright yields entice some, which should facilitate smooth digestion of today’s supply.
• The allure of new paper should also support demand.
• Some may look to enter longs on the likes of the 10-/20-/30-Year fly or via 20-/30-Year steepeeners, with 20s sitting just off multi-year cheaps on the former, while the latter sits at the flatter end of the range observed over the last couple of months.
• Results due at 0435BST/1235JST.