The Japanese MOF will today sell Y2.5tn of 5-Year JGBs opening JB#152. The MOF last sold 5-Year debt on May 18, the auction drew cover of 3.402x at an average yield of 0.017%, average price of 99.94, high yield of 0.019%, low price of 99.93, with 96.3432% of bids allotted at the high yield.
- The recent vol. and impaired market functioning of JGB futures may limit demand at today’s auction, even with 5s looking cheap on the 2-/5-/10-Year butterfly. 5s continue to operate around multi-year cheapest in outright terms, owing to market functioning dynamics and participants’ willingness to test the BoJ’s resolve when it comes to its current YCC settings. Ultimately it will be a question of value proposition vs. faith in the market when it comes to takedown & auction strength, although worry re: the latter is likely to overpower the former in our view.
- Results due at 0435BST/1235JST.