JGBS: Little Changed At Lunch Ahead Of BoJ Decision

*JAPAN 10Y GOVT BOND AUCTION MAY HAVE 100.40 LOWEST PRICE: POLL– BLOOMBERG

The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 3 June 2025. The auction drew cover of 3.6627x at an average yield of 1.512%, an average price of 99.04, a high yield of 1.513%, a low price of 99.03, with 66.8994% of bids allotted at the high yield.

• Last month’s auction revealed strong results, with the low price beating expectations at 98.95, according to the Bloomberg dealer poll. Moreover, the cover ratio increased to 3.6627x from 2.5440x, and the tail shortened to 0.01, the shortest since March 2023, from 0.18.
• That performance came with an outright yield 25bps higher than the prior month's auction level and only 10bps below the recent cyclical high of 1.596%.
• Results are due at 0435 BST / 1235 JT.

ACGBs (YM +2.0 & XM +3.5) are modestly stronger after a relatively subdued Sydney morning session to start the new financial year. 

• Outside of the previously outlined house value and PMI manf data, there hasn't been much by way of domestic drivers to flag.
• Cash US tsys are flat to 2bps richer, with a flattening bias, in today's Asia-Pac session, extending yesterday's bull-flattener.
• The cash 10-year is 4bps richer, with the AU-US 10-year yield differential at -7bps.
• The bills strip is slightly mixed, with flat to +2.
• RBA-dated OIS pricing is flat to modestly softer across meetings today. A 25bp rate cut in July is given a 95% probability, with a cumulative 83bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• This week, the AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Wednesday and A$1000mn of the 2.25% 21 May 2028 bond on Friday.