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JGBS AUCTION: Weak Demand Metrics For 20Y Auction

JGBS AUCTION
BulletAPACFixed Income BulletsJapanMarkets

The 20-year JGB auction delivered poor results across key metrics. The low price significantly underperformed dealer forecasts, which were set at 99.65 according to a Bloomberg poll. Additionally, the cover ratio declined to 3.0557x from 3.7891x in the previous auction, while the auction tail lengthened dramatically to 0.55 from 0.04. 

  • As noted in the auction preview, today’s offering featured an outright yield at a cycle high, 5bps higher than last month’s auction.
  • However, the 10/20 yield curve had flattened over the past month, reaching its lowest point since mid-2023 and the 20-year JGB was at its most expensive valuation within the 10/20/30 butterfly since late 2022.
  • This result goes against the strong performances observed in the 30-year JGB auction earlier this month.
  • Post-auction, the 20-year JGB has traded 3bps cheaper, reflecting the auction's poor reception. 
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The 20-year JGB auction delivered poor results across key metrics. The low price significantly underperformed dealer forecasts, which were set at 99.65 according to a Bloomberg poll. Additionally, the cover ratio declined to 3.0557x from 3.7891x in the previous auction, while the auction tail lengthened dramatically to 0.55 from 0.04. 

  • As noted in the auction preview, today’s offering featured an outright yield at a cycle high, 5bps higher than last month’s auction.
  • However, the 10/20 yield curve had flattened over the past month, reaching its lowest point since mid-2023 and the 20-year JGB was at its most expensive valuation within the 10/20/30 butterfly since late 2022.
  • This result goes against the strong performances observed in the 30-year JGB auction earlier this month.
  • Post-auction, the 20-year JGB has traded 3bps cheaper, reflecting the auction's poor reception.