PREVIEW: 40-Year JGB Supply Due

The Japanese MOF will today sell Y700bn of 40-Year JGBs, re-opening JB#15. The MOF last sold 40-Year debt on 26 January 2023, with the auction drawing cover of 2.554x at a high yield of 1.625%, low price of 81.95, with 5.0549% of bids allotted at the high yield.

• Some desks are a little wary of outright entry levels given the richening from YtD cheaps (registered In January), although the relative steepness of the curve will likely lure some demand.
• While the immediate worry surrounding the global banking sector provides obvious threats, the global inflationary impulse means that the major global central banks could have to deploy more tightening vs. what is currently priced into markets, presenting two-way risk to bonds at current pricing levels.
• We would usually point to the proximity to FY end as a supportive factor, although last year’s 40-Year auction ahead of the end of the FY provided a soft cover ratio.
• Since then, the upsizing of 40-Year JGB supply has seemingly biased cover ratios lower vs. the longer run historical averages.
• Results are due at 0435BST/1235JST.