PREVIEW: 40-Year Auction May Be Supported By Curve Plays & ASW

The Japanese MOF will today sell Y500bn of 40-Year JGB's re-opening
#JB13. The MOF last sold 40-Year debt on May 26, the auction drew
cover of 3.058x at a high yield of 0.505%, low price of 99.82, with
93.4959% of bids allotted at the high yield.

• 40s were spared the burden of an uptick in auction size, unlike the
  rest of the curve. Some desks recommend using the auction to
  establish a 20-/30-/40-Year fly position i.e. long wings, short belly,
  zeroing in on issuance demands and the scope for a greater fiscal
  burden as we move down the track (which could once again see 40s
  spared of any uptick in auction size), leaning on the recent strength
  of auctions & elevated ASWs, alongside the favourable supply
  dynamics for 40s. Still a lack of BoJ Rinban ops covering the longer
  end of the curve and any worry re: knock-on impact of 10-Year+
  steepening pressures may provide a slight air of caution.
• Results due at 0435BST/1235JST.