US TSYS: Asia Wrap - Quiet Session

The 20-year JGB auction delivered poor results across key metrics. The low price underperformed dealer forecasts, which were set at 100.40 according to a Bloomberg poll. Moreover, the cover ratio decreased to 2.9639x from 3.4594x in the previous auction and the auction tail lengthened dramatically to 0.34 from 0.20. 

• As noted in the auction preview, today’s offering featured an outright yield at a cycle high, 15bps higher than last month’s auction.  
• Moreover, the 10/20 yield curve was at its steepest since 1999 and the 20-year JGB was at its cheapest valuation within the 10/20/30 butterfly since early 2023.
• As a consequence, this result is likely to be seen as significantly worse than the mixed performance observed in the 30-year JGB auction earlier this month.
• Post-auction, the 20-year JGB is little changed. 

The Japanese Ministry of Finance (MOF) sells Y750.9bn 20-Year JGBs:

• Average Yield: 2.349% (prev. 2.278%)
• Average Price: 100.69 (prev. 96.20)
• High Yield: 2.374% (prev. 2.294%)
• Low price: 100.35 (prev. 96.00)
• % Allotted At High Yield: 40.8163% (prev. 44.1031%)
• Bid/Cover: 2.9639x (prev. 3.4594x)

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 at its cycle high, approximately 15bps above last month’s level.
• Moreover, the 10/20 yield curve has steepened dramatically over the past month, hitting its steepest since 1999.
• Additionally, the 20-year JGB has cheapened to its cheapest valuation within the 10/20/30 butterfly since early 2023.
• On the other hand, 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.