Sloppy Auction Applies Modest Weight

Not the most convincing round of 10-Year JGB supply, with the cover ratio continuing to hover just below the 6-auction average (which stood at 4.77x), while the low price missed wider expectations (which stood at 100.18, per the BBG dealer poll.), with the average price also printing below the expectations for the low price. The price tail widened a touch, but that was vs. no tail last time out. It would seem that uncertainty re: the BoJ kept some on the sidelines (as we suggested may be the case), while the structural richness promoted by the BoJ’s YCC settings probably acted as a further headwind for demand. Futures tick lower post-supply, while 10-Year JGB yields tick through 0.49%, operating just below the upper limit of the BoJ’s YCC settings. Super-long paper also cheapens at the margin.