PREVIEW: 30-Year JGB Supply Due

The Japanese MOF will today sell Y900bn of 30-Year JGBs, re-opening JB#76. The MOF last sold 30-Year debt on October 12, the auction drew cover of 2.887x at an average yield of 1.480%, average price of 98.32, high yield of 1.496%, low price of 98.00, with 91.3793% of bids allotted at the high yield.

• Outright yields are off cycle highs, with some stabilisation in the sector observed over the last couple of sessions after fresh cheapening crept in last week.
• This may facilitate some outright demand, with the ongoing volatility and high FX-hedging costs associated with offshore bonds already generating a well-documented home bias within the Japanese investor cohort.
• Still, this volatility has weighed on demand in some of the more recent super-long auctions out of Japan, even with outright yields at the more compelling end of the recent ranges.
• The confinement of the financing of the latest supplementary budget to the shorter end of the curve may remove one of the headwinds for demand.
• 30s tagged fresh cycle steeps vs. 20s in recent sessions, with the recent widening perhaps bringing some relative value demand into the fray.
• Overall, it’s a hard one to judge on the demand front.
• Results due at 0335GMT/1235JST.