PREVIEW: 20-Year Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGB's opening JB#177. The MOF last sold 20-Year debt on June 24, the auction drew cover of 3.618x at an average yield of 0.433%, average price of 101.21, high yield of 0.436%, low price of 101.15, with 31.0507% of bids allotted at the high yield.

• The allure of new paper should generate interest at today's auction, with demand set to be bolstered by the fact that the 20-Year point of the curve offers the most attractive carry & roll down proposition among major JGB benchmarks.
• Still, focus on the likelihood of an announcement of a supplementary budget in the autumn, coupled with JGB rally stalling in recent days (10-Year yields stopped shy of a challenge of 0bp) may limit outright demand.
• Some desks have started to look at the likes of 7-/20-Year flattener exposure and long JGB positions in ASW terms ahead of supply, which could support broader demand, with those positions set to benefit from the aforementioned carry & roll appeal.
• Results due at 0435BST/1235JST.