PREVIEW: 40-Year JGB Supply Due

The Japanese MOF will today sell Y700bn of 40-Year JGBs opening JB#15. The MOF last sold 40-Year debt on March 29, the auction drew cover of 2.194x at a high yield of 1.095%, low price of 87.50, with 77.6000% of bids allotted at the high yield.

• The auction method is Dutch-style-yield-competitive auction at intervals of 0.5bp.
• Outright 40-Year yields operate a touch shy of the cycle highs, last printing at 1.10%, with the wider short-term stabilisation in core global FI markets and relatively elevated outright yield levels likely to entice some, even though the BoJ has less relative control over the super-long end of the yield curve.
• This, coupled with the steep domestic curve (both in a local and international sense) should entice bidders resulting in smooth digestion. This should hold given the general views outlined in the recent round of life insurer investment intention interviews, even though Japanese investors have been net buyers of foreign bonds for two consecutive weeks (for the first time since January).
• The allure of fresh paper may also support takedown.
• Results due at 0435BST/1235JST.