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 25 January 2024, the auction drew cover of 2.148x at a high yield of 1.925%, a low price of 82.87, with 46.7391% of bids allotted at the high yield.

• The late January 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 2.148x from 2.208x observed in the late-September auction. This marked a reversal in the trend, as the cover ratio had been steadily increasing since May. Notably, January’s ratio represented the lowest level at a 40-year auction since March 2022.
• Today’s supply follows poor demand metrics at the 20- and 30-year JGB auctions held in March. Both auctions experienced a downtick in their cover ratios and the respective low prices fell short of dealer expectations.
• It's important to note that the current 40-year auction is taking place with the outright yield approximately 15-20bps higher compared to the late January 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 for the past 12 months.
• Results are due at 0335 GMT / 1235 JST.