PREVIEW: 30-Year JGB Supply Due

The Japanese MOF will today sell Y900bn of 30-Year JGB's re-opening JB#73. The MOF last sold 30-Year debt on February 3, the auction drew cover of 3.447x at an average yield of 0.788%, average price of 97.86, high yield of 0.788%, low price of 97.85, with 90.1222% of bids allotted at the high yield.

• The well documented cheapening that has been observed in recent months should provide a baseline level of demand, with the back up from recent cheaps having the potential to embolden potential bidders. Still, the susceptibility to the pace of further cheapening on the back of continuous fresh multi-year highs when it comes to oil prices may limit wider demand.
• The relative steepness of the curve may also attract demand at auction, although this is less clear cut, given the velocity of the recent steepener impulse and questions re: the degree of tightening that global central banks will deliver in ’22.
• Long JGB legs on asset swap positions may also generate some interest, given the carry benefits and impending alterations to the BoJ’s Special Program to Support Financing in Response to COVID-19 (particularly if regional banks and the like look to redeploy funds parked under the scheme elsewhere).
• Results due at 0335GMT/1235JST.