PREVIEW: 5-Year JGB Supply Due

The Japanese MOF will today sell Y2.5tn of 5-Year JGBs, reopening JB#153. The MOF last sold 5-Year debt on Aug 16, the auction drew cover of 3.399x at an average yield of -0.007%, average price of 100.06, high yield of -0.003%, low price of 100.04, with 43.2300% of bids allotted at the high yield.

• Demand should be supported by 5-Year JGB yields operating around the top of the range observed in the time since the challenge of the BoJ’s YCC settings in mid-June and no real prospect of an imminent shift in the central bank’s settings.
• The carry and roll of 5s against surrounding paper should further boost demand.
• Also note that 5s sit around the cheapest levels observed on the 2-/5-/10-Year butterfly since the mid-June challenge of the BoJ’s YCC policy settings.
• Results due at 0435BST/1235JST.