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

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, #102-166 & #351-369 will be on offer.

• The previous liquidity enhancement auction covering these maturities was held on 23 March 2023. The auction was covered 3.297x at an average spread of -0.037%, a high spread of -0.031% was registered, with 86.0674% of the bids allotted at the high spread.
• While this event provides a liquidity accessing opportunity, and therefore will likely generate at least a baseline level of demand, last month’s offering suggests that any meaningful desire for access to paper in this area of the curve may have waned a little, at least on the surface.
• However, that auction came at the height of the U.S. banking tumult and after the BoJ left its monetary policy settings unchanged (when bonds were at/around richest levels of March). The subsequent round of cheapening, witnessed intra-auction, may result in a slightly different result this time out, with both short cover and outright demand potentially factoring into matters.
• Results due at 0435BST/1235JST.