Weaker Demand Seen At 5-year Auction

Today's supply of 5-year bonds faced lacklustre reception, with the auction's pricing falling short of dealer expectations, which had been projected at 100.03 as per the BBG poll. This was reflected in a weakened cover ratio of 3.346x, a notable decline from the 4.680x recorded in the previous month's auction. Moreover, the cover ratio was the lowest observed at a 5-year auction since March. Adding to these concerns, the tail also grew longer, marking its most extended length since March.

• The highest outright 5-year yield level since March combined with expectations of ongoing monetary easing failed to greatly assist the takedown of today's auction.
• The richening of the belly in the 2/5/10-year butterfly since the previous auction possibly had a material impact on demand.
• At the start of the afternoon trading session, JGB futures have gapped down from lunch break levels.
• The 5-year JGB is around 1.0bp cheaper at 0.198% after the auction to be 0.2bp lower on the day.