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 7 February 2023, the auction drew cover of 3.323x at an average yield of 1.543%, average price of 101.15, high yield of 1.551%, low price of 101.00, with 96.9964% of bids allotted at the high yield.

• Outright yield levels are ~30bp back from cycle highs, sitting just above 1.40%, with diminished expectations for a hawkish policy tweak at the upcoming BoJ decision front and centre there. The latter should facilitate smooth enough digestion of today’s auction, even given the former.
• Seasonal demand from life insurers should add an additional leg of support for takedown.
• The recent flattening on the likes of the 5-/30-Year curve and richness on the 20-/30-/40-Year butterfly (over the longer term, with a recent pullback from richest levels on the structure noted) present potential headwinds which could limit demand to some degree.
• Expectations for hawkish policy tweaks from the BoJ at some point in the next FY is another impediment for demand.
• Overall, we expect smooth, although not stellar passage of supply.
• Results due at 0335GMT/1235JST.