PREVIEW - 30-Year JGB Auction Due

The Japanese Ministry of Finance (MOF) will today sell Y900bn of 30-Year JGBs, re-opening JB#78. The MOF last sold 30-year debt on 11 May 2023, the auction drew cover of 3.489x at an average yield of 1.252%, an average price of 103.20, a high yield of 1.257%, a low price of 103.10, with 79.9768% of bids allotted at the high yield.

• Today’s 30-year supply comes after the previous auction exhibited a cover ratio at the highest level observed at a 30-year auction since January 2022.
• The cheapening of the belly in the 20-/30-/40-year butterfly over the past month should provide added support at today's auction. The takedown at the previous auction appeared to benefit from a cheapening of the belly. However, it is worth noting that the 30-year bond remains expensive on a longer-term horizon.
• Furthermore, today's auction is anticipated to generate demand at least on par with last month’s outing given the similarity of the outright yield and a slightly steeper yield curve.
• Additionally, auction demand today is likely to be bolstered by recent downside surprises in inflation data and the capital reallocation trend by local investors from foreign markets towards the longer end of the JGB curve during the current fiscal year.
• Results are due at 0435 BST/1235 JST.