PREVIEW: It Is All Relative Amid A Congested Issuance Schedule

The Japanese MOF will today sell Y1.2tn of 20-Year JGB's re-opening JB#173. The MOF last sold 20-Year debt on July 21, the auction drew cover of 3.800x at an average yield of 0.416%, average price of 99.70, high yield of 0.419%, low price of 99.65, with 28.5714% of bids allotted at the high yield.

• Outright yields hover around the levels witnessed at July's well received offering, although worry re: the demand/supply balance appears to be a little more pronounced at present, leaving most desks focused on relative value setups ahead of supply.
• Worry re: the supply/demand outlook is compounded by unusually short turn around between the August and September 20-Year offerings, with the same pattern also observed in the 30-Year tenor (which resulted in a weak auction last week). This may place some focus in 20-/30-Year steepeners in the coming days.
• Still, there was no signs of outright concession in 20s during the Tokyo morning.
• 20-Year ASWs remain elevated, albeit off of March extremes, and may present a point of entry.
• Desks have also pointed to the potential for decent short covering demand at auction.
• Results due at 0335GMT/1235JST.