PREVIEW: 20-Year Supply Due

The Japanese MOF will today sell Y1.2tn of 20-Year JGB's re-opening JB#177. The MOF last sold 20-Year debt on July 13, the auction drew cover of 3.515x at an average yield of 0.404%, average price of 99.92, high yield of 0.408%, low price of 99.85, with 9.4094% of bids allotted at the high yield.

• Relatively light dealer inventory has been cited as a potential supportive factor ahead of today's auction. This is the view of several desks, even though 20s yield only a little over 0.40% in outright terms, which is towards the richer end of the YtD range. Desks have suggested that demand may be a little less resounding if yields were sub-0.40%.
• Still, risks remain in outright terms, with the potential for increased budget demands potentially hampering this sector of the curve later in the year.
• This may create a lean towards relative positions. Desks have identified the likes of 7-/20-Year flatteners and longs via ASW positions as potential attractive plays.
• A reminder that 20s provide the 2nd most attractive carry & roll proposition across the major benchmarks, only bettered by 10s.
• Results due at 0435BST/1235JST.