PREVIEW: 20-Year Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGB's opening JB#176. The MOF last sold 20-Year debt on March 11, the auction drew cover of 3.401x at an average yield of 0.513%, average price of 99.75, high yield of 0.519%, low price of 99.65, with 33.1567% of bids allotted at the high yield.

• Participants need to balance the lack of long dated supply (a 3-week hiatus after today's auction) vs. the lack of super-long BoJ purchases during the remainder of April. Carry in the sector should alleviate at least some of the worry re: the lack of imminent BoJ purchases, given the early May holiday in Japan.
• 20s trade at the richest levels seen since January on the 10-/20-/30-Year fly, which could limit demand for relative value plays.
• Still, JGB auctions have seen solid enough demand since late March, with less uncertainty surrounding near-term BoJ settings evident, although a focus on the allure of foreign bond yields may ultimately cap demand.
• Results due at 0435BST/1235JST.