PREVIEW: 5-Year JGB Supply Due

The Japanese MOF will today sell 2.5tn of 5-Year JGBs, re-opening JB#156. The MOF last sold 5-Year debt on 16 February 2023, the auction drew cover of 3.997x at an average yield of 0.216%, average price of 99.92, high yield of 0.216%, low price of 99.92, with 87.9205% of bids allotted at the high yield.

• While outright yield levels operate at the lowest levels seen since early October, the move away from 10-Year JGB yields leaves 5s sitting at fresh cycle cheaps on the 2-/15-/10-Year butterfly.
• This also comes with 5s offering the most attractive carry and roll proposition on the curve at present.
• We believe that mix, coupled with the prospect of an additional BoJ YCC tweak in the coming months (which some have suggested could see a switch of focus to the 5-Year sector), should present solid enough demand at today’s auction, even with outright value capping bids, at least to some degree.
• Results due at 0335GMT/1235JST.