PREVIEW: 20-Year Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGB's re-opening JB#175. The MOF last sold 20-Year debt on January 19, the auction drew cover of 3.346x at an average yield of 0.443%, average price of 101.04, high yield of 0.448%, low price of 100.95, with 78.8026% of bids allotted at the high yield.

• The recent reflation narrative and potential for tweaks to BoJ monetary policy settings in March may keep some potential participants sidelined despite the outright cheapening and curve steepening witnessed in recent weeks.
• Some have suggested that short positioning among dealers may aid takedown.
• This confluence of factors has left most pointing to a smooth enough auction, although dealers are unlikely to provide aggressive bids owing to the aforementioned signs of caution.
• Relative value plays touted include longs as part of steepener positions vs. longer dated paper, in addition to positioning for continued outperformance vs. swaps, although both of these views are predicated on the reflation/BoJ adjustment matters flagged above.
• Results due at 0335GMT/1235JST.