Strong Result For Today’s 2Y Supply

The 2-year bond supply has demonstrated very strong demand metrics, as the low price beat dealer expectations, which had been projected at 100.005, as per the BBG poll, and the cover ratio increased to 5.542x from 4.187x in July. The auction tail was also slightly shorter than last month.

• Despite today's auction occurring at a yield slightly below July's level and 10bps lower than the cyclical peak earlier this month, the current 2-year yield proved sufficient to attract demand, even with the prospect of further tightening from the BoJ.
• It's also notable that the auction took place with the 2/5 and 2/10 yield curves near their flattest points in the past 12 months.
• Additionally, today's strong result stands in stark contrast to the lacklustre demand seen in this month's 5- and 10-year auctions.
• The cash 2-year yield is 2.5bps lower in post-auction trade.