PREVIEW: 30-Year JGB Supply Due

The Japanese MOF will today sell Y900bn of 30-Year JGBs, opening JB#76. The MOF last sold 30-Year debt on September 6, the auction drew cover of 3.278x at an average yield of 1.235%, average price of 101.41, high yield of 1.240%, low price of 101.30, with 13.8349% of bids allotted at the high yield.

• 30-Year JGB yields have moved back towards cycle cheaps, with the 10-/30-Year yield curve operating just shy of cycle steeps. These factors are a positive for demand in isolation, although the ongoing market vol. and relative lack of BoJ control over this area of the curve may deter some from deploying capital.
• Still, these yield levels should entice enough domestic demand to provide a solid enough baseline round of bids (if not more), with the domestic lifer and pension fund community eying super-long JGBs owing to prohibitive FX-hedging costs when it comes to global bonds.
• The 20-/30-/40-Year butterfly operates around the middle of the recently observed range.
• Results due at 0435BST/1235JST.