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 8 August 2023, the auction drew cover of 3.504x at an average yield of 1.593%, an average price of 92.04, a high yield of 1.595%, a low price of 92.00, with 92.6441% of bids allotted at the high yield.

• 30-year supply saw relatively good digestion, with the low price surpassing dealer expectations and the cover ratio ticking up to its highest level since Jan’22. The auction tail also shortened to its shortest since Feb’22.
• However, today's auction follows Tuesday's 10-year supply, which yielded mixed results. While the 10-year JGB auction featured an improved cover ratio compared to its August counterpart, the low price fell short of broader expectations, and the tail extended to its longest since April.
• Nonetheless, the current level for the outright yield and the 2/30 yield curve, which sit just below their highest points since 2014, may attract investors to today's auction.
• Furthermore, the slight cheapening of the 30-year JGB in a 20-/30-/40-year butterfly over the past month could provide additional support. It's worth noting, however, that the 30-year bond remains expensive from a longer-term perspective.
• In summary, while last month's auction was well-received, this week's 10-year supply suggests that local investors may seek higher yields and/or more time to assess the new YCC framework and the BoJ's policy outlook before significantly increasing their allocations to the JGB market.
• Results are due at 0435 BST/1235 JST.