PREVIEW - 40-Year JGB Auction Due

The Japanese Ministry of Finance (MOF) will today sell Y700bn of 40-Year JGBs. The MOF last sold 40-year debt on 28 November 2023, the auction drew cover of 2.208x at a high yield of 1.810%, a low price of 85.70, with 85.0649% of bids allotted at the high yield.

• The late November auction of 40-year JGBs saw a tepid reception, as the high yield came in higher than dealer expectations and the cover ratio decreased to 2.208x from 2.95x observed in the late-September auction. This marked a reversal in the trend, as the cover ratio had been steadily increasing since May. Notably, November’s ratio represented the lowest level at a 40-year auction since March 2022.
• Today’s supply follows mixed demand metrics at the 20- and 30-year JGB auctions held in January. While both auctions experienced an uptick in their cover ratios, the low prices achieved fell short of dealer expectations.
• It's important to note that the current 40-year auction is taking place with the outright yield approximately 25bps higher compared to the late November offering but around 10bps lower than the cycle peak of 2.18% set in late October.
• It is also noteworthy that the current 20/40 yield curve sits in the top half of the range with respect to the past 12 months.
• Results are due at 0335 GMT / 1235 JST.