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The Japanese MOF will today sell Y1.2tn of 20-Year JGB's opening JB#178. The MOF last sold 20-Year debt on September 16, the auction drew cover of 3.203x at an average yield of 0.412%, average price of 99.77, high yield of 0.416%, low price of 99.70, with 64.0878% of bids allotted at the high yield.

  • The 20-Year auction comes at a time when investors will have to assess the latest yield backup (a demand positive) against the prospect of further cheapening on global dynamics and fiscal demands in Japan (a demand negative).
  • The anchored local inflation/monetary policy story provides some insulation from the global dynamic, at least in relative terms, which has some desks pointing to an opportunity to enter both outright longs and 10-/20-Year flatteners.
  • Outright 20-Year yields sit just below Monday's multi-month highs, while the 10-/20-Year yield spread hovers around the middle of the recent range (although bears the risk of steepening pressure surrounding fiscal requirements in the coming months, as well as providing a slightly negative carry and roll proposition).
  • Results due at 0435BST/1235JST.