PREVIEW: 30-Year JGB Supply Due

The Japanese MOF will today sell Y900bn of 30-Year JGBs, re-opening JB#77. The MOF last sold 30-Year debt on 11 January 2023, the auction drew cover of 3.105x at an average yield of 1.649%, average price of 99.00, high yield of 1.654%, low price of 98.90, with 38.0180% of bids allotted at the high yield.

• Outright yield levels should be elevated enough to promote a baseline level of demand at today’s auction, with the recent stabilisation away from cycle cheaps being a product of reduced speculation re: an imminent change in BoJ YCC settings.
• Relative value constraints are more of a negative, with 30s operating at the richer end of the multi-year range on the 20-/30-/40-Year butterfly, albeit back from cycle extremes.
• Also note that 20s provide a slightly more attractive carry and roll proposition than 30s. although this of course somewhat skewed by the BoJ’s YCC settings.
• Continued uncertainty re: the trajectory of BoJ policy in the post-Kuroda era also complicates matters.
• Results due at 0335GMT/1235JST.