PREVIEW - 30-Year JGB Auction Due

The Japanese Ministry of Finance (MoF) will today sell Y900bn of 30-Year JGBs. The MoF last sold 30-year debt on 7 January 2024, the auction drew cover of 3.003x at an average yield of 1.629%, an average price of 99.40, a high yield of 1.649%, a low price of 1.649, with 54.7563% of bids allotted at the high yield.

• 30-year supply in January saw mixed demand metrics, with the low price failing to meet dealer expectations but the cover ratio increasing to 3.003x from 2.616x in December. It is noteworthy however that December’s cover was the lowest level seen at a 30-year auction since 2015.
• Today's auction also follows last week’s 10-year supply, which bucked recent trends and showed solid demand metrics. The low price matched wider expectations, the tail shortened, and the cover ratio improved to 3.648x from 2.904x at January’s auction.
• The current 30-year auction is taking place with an outright yield that is 15bps higher than the early January offering. The 2/30 yield curve is 15bps steeper and the 10/30 curve 5bps steeper than the levels observed in early January.
• 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 also 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 still bullish sentiment towards long-end global bonds, although there has some tapering of market exuberance of late.
• 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.