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PREVIEW - 5-Year JGB Auction Due

JGBS AUCTION

The Japanese Ministry of Finance (MOF) will today sell Y2.5tn of 5-Year JGBs, re-opening JB#158. The MOF last sold 5-year debt on 15 May 2023, the auction drew cover of 3.703x at an average yield of 0.116%, an average price of 99.92, a high yield of 0.120%, a low price of 99.90, with 13.5990% of bids allotted at the high yield.

  • The 5-year JGB auction today comes after the June BoJ policy meeting last Friday largely unfolded as expected, with no major changes to the key policy parameters or the policy outlook.
  • Today’s auction also follows solid absorption of 10- and 30-year JGB supply in early June.
  • The outright 5-year yield level may however present a hurdle since it is lower than that seen at any monthly auction this year, including the March offering which saw tepid demand.
  • Adding to potential demand headwinds, the 2-/5-/10-year butterfly's belly currently sits just above the cycle's richest levels. In contrast, the 5s were at fresh cycle cheaps ahead of the 5-year supply in March.
  • While these factors may potentially limit bids, it is worth noting that the receding possibility of BoJ policy adjustments in the upcoming months could offer some form of offset.
  • Results are due at 0435 BST/1235 JST.

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