PREVIEW: 20-Year Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGB's re-opening JB#176. The MOF last sold 20-Year debt on May 21, the auction drew cover of 3.478x at an average yield of 0.445%, average price of 101.00, high yield of 0.450%, low price of 100.90, with 37.4530% of bids allotted at the high yield.

• Some modest concession in the Tokyo morning has left the line trading ~1.5bp richer vs. the average yield generated at the previous auction, well within the confines of the recent range, although they hardly look cheap in outright terms.
• 20-Year swap spreads sit around multi-month tights, while 20s have moved away from multi-month riches on the 10-/20-/30-Year fly in recent session, pointing to a lack of headwinds on the relative value front, although there may be a lack of attractiveness witnessed here.
• 20s offer a more attractive carry and roll proposition than longer dated benchmarks, although 10s are still marginally more attractive on that front.
• This week's ~Y8tn redemption of an expiring JGB should help demand.
• Over the medium-term focus will fall on the potential declaration of a supplementary budget that could be announced ahead of a snap election.
• Results due at 0435BST/1235JST.