PREVIEW - 5-Year JGB Auction Due

The Japanese Ministry of Finance (MoF) will today sell Y2.5tn of 5-Year JGBs, re-opening JB#163. The MOF last sold 5-year debt on 12 December 2023, with the auction drawing cover of 3.851x at an average yield of 0.325%, an average price of 100.35, a high yield of 0.331%, a low price of 100.32, with 26.5146% of bids allotted at the high yield.

• The 5-year auction held in December witnessed mixed results The auction's low price beat dealer expectations but the cover ratio of 3.851x was lower than the 4.056x recorded at the previous month's auction. However, it is worth noting that November's result was the third highest for a 5-year auction in the past 12 months.
• However, today's auction comes on the heels of suboptimal results at January’s 10- and 30-year JGB supply.
• The current 5-year auction is taking place with an outright yield at its lowest level since late July. The 2/5 curve is also around 10bps flatter than at the December auction.
• On the positive side, the current auction takes place against a backdrop of persistently bullish sentiment toward global bonds, as exemplified by the US Treasury 5-year yield remaining 115bps below its cycle peak set in late October.
• In light of these circumstances, it will be intriguing to observe whether today’s supply will deviate from the recent trend of lacklustre demand metrics seen in JGB auctions.
• Results are due at 0335 BST / 1235 JST.