PREVIEW: Liquidity Enhancement Auction For OTR 5-15.5-Year JGBs

The Japanese Ministry of Finance (MOF) will today sell Y500bn of JGBs with 5-15.5 years until maturity in a liquidity enhancement auction. JB#1-29, #105-167 & #352-370 will be on offer.

• The previous liquidity enhancement auction covering these maturities was held on 8 June 2023. The auction was covered 3.100x at an average spread of +0.002%, and a high spread of +0.003% was registered, with 68.7280% of the bids allotted at the high spread.
• Last month’s offering saw lower demand, with the cover ratio hitting the lowest level since April and the average spread remaining in positive territory, albeit lower than the May LEP.
• While this event provides a liquidity accessing opportunity, and therefore will likely generate at least a baseline level of demand, the cheapening in the 5-15-year zone since the June 8 auction could see demand for paper in those areas of the curve rebound.
• Indeed, with the outright yield levels across all lines are around those prevailing at the April 19 auction, demand could approach those levels. The cover ratio in April hit the highest level seen since December’s 5-15.5 years liquidity enhancement offering.
• Results are due at 0435 BST/1235 JST.