PREVIEW: 40-Year JGB Supply Due

The Japanese MOF will today sell Y600bn of 40-Year JGB's opening #JB14. The MOF last sold 40-Year debt on March 25, the auction drew cover of 2.800x at a high yield of 0.675%, low price of 94.01, with 100% of bids allotted at the high yield.

• Outright 40s have cheapened since late April, and now provide a slightly more attractive headline yield entry point vs. prevailing levels seen at 40-Year auctions going back to early '19, which could support demand. Elsewhere, the government doesn't seem to be in a hurry to issue a supplementary budget (although such a move could come later in the year), which could prove to be another incremental positive for demand.
• On the relative value front, 40s have underperformed vs. both 20s and 30s in recent weeks, with the wider curve also steepening. However, the more attractive carry and roll proposition provided by the 20- to 30-Year sector of the curve may be a driver of the steepening vs. those particular benchmarks, given the lower vol. backdrop, meaning that participants may be unwilling to initiate flatteners.
• Results due at 0435BST/1235JST.