PREVIEW - 30-Year JGB Auction Due

The Japanese Ministry of Finance (MOF) will today sell Y900bn of 30-Year JGBs, opening JB#81. The MOF last sold 30-year debt on 7 December 2023, the auction drew cover of 2.616x at an average yield of 1.623%, an average price of 103.55, a high yield of 1.681%, a low price of 102.35, with 14.00% of bids allotted at the high yield.

• 30-year supply in December saw very poor digestion as the low price failed to meet dealer expectations and the cover ratio collapsed to 2.616x, the lowest level seen at a 30-year auction since 2015. The auction tail was also the longest on record.
• Moreover, today's auction follows Tuesday's 10-year supply, which once again showed poor demand metrics. The low price failed to meet wider expectations and the tail lengthened. The cover ratio improved slightly to 2.904x from 2.823x at the previous auction but it is worth noting that December’s cover was the lowest seen at a 10-year auction since 2021.
• The current 30-year auction is taking place with an outright yield at a similar level to the early December offering. The 2/30 yield curve is slightly flatter, but the 10/30 curve slightly steeper, than the levels observed in early December.
• There has also been a slight cheapening of the 30-year JGB in a 20-/30-/40-year butterfly over the past month, which could help support the bid at today’s auction. It's worth noting, however, that the 30-year bond remains expensive with a longer-term perspective.
• On the positive side, today's auction occurs amidst bullish sentiment towards long-end global bonds, exemplified by the US tsy 30-year yield sitting some 100bps below its cycle peak set in late October.
• Against this backdrop, it will be intriguing to observe whether today’s supply bucks the recent trend of poor demand metrics at JGB auctions.
• Results are due at 0335 GMT / 1235 JT.