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 10 May 2024. The auction drew cover of 3.245x at an average yield of 1.992%, an average price of 96.40, a high yield of 2.008%, and a low price of 96.10, with 9.1240% of bids allotted at the high yield.

• 30-year supply in May saw poor digestion as the cover ratio dropped to 3.254x from 3.470x in April. It is noteworthy that the auction tail also widened.
• However, today's auction follows Tuesday’s 10-year supply, which showed solid demand metrics. The low price beat wider expectations, the tail shortened and the cover ratio rising to 3.662x from 3.151x at May’s auction.
• The current 30-year auction is taking place with an outright yield of around 20bps higher than the early May offering. Additionally, the 2/30 and 10/30 yield curves are around 15bps and 10bps steeper respectively than the levels observed in early May.
• Over the past month, there has also been a dramatic cheapening of the 30-year JGB in a 20-/30-/40-year butterfly. This shift could potentially support the demand at today's auction, especially considering the 30-year now has a cheap valuation from a longer-term standpoint.
• Also on the positive side, today's auction occurs amidst a strong weeklong rally in long-end global bonds.
• Against this backdrop, it will be intriguing to observe whether today’s supply follows the lead set by this week’s 10-year auction.
• Results are due at 0435 GMT / 1235 JT.