PREVIEW - 30-Year JGB Auction Due

The Japanese Ministry of Finance (MOF) will today sell Y900bn of 30-Year JGBs, opening JB#80. The MOF last sold 30-year debt on 7 September 2023, the auction drew cover of 3.461x at an average yield of 1.640%, an average price of 91.18, a high yield of 1.656%, a low price of 90.90, with 11.5720% of bids allotted at the high yield.

• 30-year supply in September saw poor digestion, with the low price failing to meet dealer expectations and the cover ratio ticking down. The auction tail was also significantly longer than the previous auction. Barring the July result, the tail was the longest since April ’20.
• However, today's auction follows Tuesday's 10-year supply, which yielded mixed results. The low price beat wider expectations and the tail shortened. However, the cover ratio declined to 3.934x from 4.019x at the September auction.
• Nonetheless, the current level for the outright yield and the 2/30 yield curve, which sit at 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 some additional support. It's worth noting, however, that the 30-year bond is around a mid-range valuation with a longer-term perspective.
• Overall, while longer-dated auctions earlier in the fiscal year benefited from local investors shifting capital away from foreign markets toward JGBs, this dynamic has shifted somewhat following the BOJ’s YCC adjustment in late July and the push higher in longer-dated global bond yields.
• Results are due at 0435 BST/1235 JST.