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 6 June 2024. The auction drew cover of 3.591x at an average yield of 2.156%, an average price of 93.54, a high yield of 2.161%, and a low price of 93.45, with 64.5739% of bids allotted at the high yield.

• 30-year supply in June saw strong demand metrics. The low price beat dealer expectations the cover ratio increased, and the auction tail narrowed.
• Today's auction also follows Tuesday’s 10-year supply, which showed solid demand metrics, with the low price beating wider expectations. However, the cover ratio fell and the tail was unchanged, albeit at a short length.
• The current 30-year auction is taking place with an outright yield that is around 15bps higher than the early June offering and around its cycle high.
• Additionally, the 2/30 and 10/30 yield curves are around 20bps and 5bps steeper respectively than the levels observed in early June.
• The dramatic cheapening of the 30-year JGB in a 20-/30-/40-year butterfly in May has held. Like last month, this could support demand at today's auction, especially considering the 30-year now has a cheap valuation from a longer-term standpoint.
• On the negative side, today's auction occurs amidst discussion about the outlook for the BoJ’s quantitative tightening, the details of which will be released at the late July MPM.
• 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.