PREVIEW: 30-Year Supply Due

The Japanese MOF will today sell Y900bn of 30-Year JGB's opening JB#69. The MOF last sold 30-Year debt on December 3, the auction drew cover of 3.487x at an average yield of 0.648%, average price of 98.80, high yield of 0.650%, low price of 98.75, with 82.6720% of bids allotted at the high yield.

• It will be another auction that participants will need to assess in the light of the expected fiscal dynamic in the U.S., the desire for a steeper yield curve on behalf of the BoJ and the short- to medium-term impact COVID-19.
• There are also several cases of more attractive G10 10-Year yield propositions in FX hedged terms for Japanese investors, which is a headwind for potential digestion. Still some desks have suggested that participants should at least consider outright longs, flatteners and long exposure via ASW plays ahead of the auction.
• Outright 30-Year JGB yields have challenged recent highs over the past few days, while the 5-/30-, 10-/30- & 20-/30-Year JGB curves are within touching distance of recent steeps.
• Results due at 0335GMT/1235JST.