PREVIEW: 30-Year JGB Supply Due

The Japanese MOF will today sell Y900bn of 30-Year JGBs, opening JB#78. The MOF last sold 30-Year debt on 7 March 2023, the auction drew cover of 2.997x at an average yield of 1.416%, average price of 103.84, high yield of 1.425%, low price of 103.65, with 78.3018% of bids allotted at the high yield.

• Positives for demand include the potential for an upsizing of super-long end purchases from the BoJ at some point, with Mizuho recently noting “offer amounts were indeed reduced for the 25-Year+ sector in February and March, but that now looks likely to have been a temporary response to seasonal supply/demand tightness ahead of the fiscal-year turn.”
• Elsewhere, the richness of 30s on the likes of the 20-/30-/40-Year butterfly has moderated from cycle extremes, although 30s remain rich on that structure when viewed over a longer time horizon.
• The turn of the Japanese FY, recent outright richening/curve flattening and the continued uncertainty re: the trajectory of BoJ policy in the coming months provide potential headwinds to the auction.
• Note that domestic lifer/pension capital deployment intentions are largely unknown at present (we should get some insight on this front over the next couple of weeks), although Dai-Ichi Life have outlined their intentions to repatriate some capital, with an eye on at least partial redeployment into the super-long JGB space for LDI matching purposes.
• Results due at 0435BST/1235JST.