Spreads Widen At Super-Long Liquidity Enhancement Auction

The latest round of cheapening didn’t lure participants into picking up off-the-run 15.5+-Year JGBs at today’s liquidity enhancement auction, with spreads witnessed at auction widening, alongside a widening in the gap between the average and high spread observed when compared to the previous auction. The cover ratio held steady, just above 2.00x, although that is by no means firm. Some had suggested that the recent cheapening of super-long JGBs may draw increased lifer demand into the fold at today’s auction, that didn’t seem to occur. Super-long yields nudge higher post-supply, while JGB futures come under light selling pressure, with the aforementioned spread dynamic in the liquidity enhancement auction likely driving price action. This morning’s bear steepening has extended as a result, with benchmarks across the JGB curve little changed to 2bp cheaper on the session. 10-Year yields have registered a fresh cycle high, printing 22.5bp, while JGB futures have respected recent lows, so far.