JGBS AUCTION: 5-Year JGB Auction Results

RBA-dated OIS pricing is flat to slightly softer across meetings today, with July/August leading, ahead of tomorrow’s RBA Policy Decision. 

• A 25bp rate cut in May is given a 97% probability, with a cumulative 77bps of easing priced by year-end.
• Notably, today’s moves leave meetings pricing 3-42bps firmer than levels before the release of Q1 CPI data on April 30.

Figure 1: RBA-Dated OIS – Current Vs. Pre-Q1 CPI

Source: MNI - Market News / Bloomberg

The Japanese Ministry of Finance (MoF) will today sell Y1.0tn of 20-Year JGBs. 

• Today’s 20-year JGB auction offers an outright yield near its cycle high, approximately 5bps above last month’s level.
• Moreover, the 10/20 yield curve remains near its recent high, its steepest since 1999.
• However, the 20-year JGB has richened over the past month and sits near its richest valuation within the 10/20/30 butterfly seen during the past year.
• Furthermore, the auction comes amid souring sentiment toward long-term global bonds.
• Given these dynamics, it remains to be seen whether today’s supply can generate some positive momentum for JGB auctions or if market caution will weigh on demand.
• Results are due at 0435 GMT / 1235 JT.

*JAPAN 20Y GOVT BOND AUCTION MAY HAVE 99.80 LOWEST PRICE: POLL– BLOOMBERG