PREVIEW - 30-Year JGB Auction Due

The Japanese Ministry of Finance (MOF) will today sell Y900bn of 30-Year JGBs, re-opening JB#79. The MOF last sold 30-year debt on 6 July 2023, the auction drew cover of 3.027x at an average yield of 1.222%, an average price of 99.50, a high yield of 1.238%, a low price of 99.15, with 10.0000% of bids allotted at the high yield.

• 30-year supply in July saw relatively poor digestion as the low price failed to meet dealer expectations and the cover ratio ticked down to its lowest level since March. The auction tail was also significantly longer than the June auction, rising to the highest level since Apr-2020.
• While the highest outright yield since January would be normally expected to entice investors, today's auction is taking place in the aftermath of the BoJ's recent decision to tweak yield curve control (YCC) for greater flexibility. The 10-year yield is no longer strictly limited to the 50bp upper band and can exceed up to 1%, with the BoJ planning to adjust yields within the range of 0.5% to 1% based on market conditions. Last week, the BoJ announced two unscheduled bond-buying programs of Y300bn at market prices. The 10-year yield currently stands at 0.633%, and the 30-year at 1.606% compared to 1.32% before the YCC tweak.
• It's worth noting that last week's 10-year supply performed relatively poorly, with the low price falling short of expectations, the cover ratio decreasing, and the tail lengthening. Interestingly, the higher outright yield and steeper yield curve failed to alleviate investor uncertainty regarding the implications of BoJ's YCC adjustment.
• Results are due at 0435 BST/1235 JST.