JGBS AUCTION: Poll: 30-Year JGB Auction

The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 8 May 2025. This month’s auction offers an outright yield 25bps higher than last month and approximately 10bps below the recent cyclical high of 1.596% reached in late March, just prior to President Trump’s announcement on reciprocal tariffs.

• However, the 2s/10s and 7s/10s yield curves are around a similar level to last month.
• Notably, investor sentiment toward longer-dated global bonds has weakened since early May, albeit having improved slightly over the past week.
• Bank of Japan Governor Ueda, speaking in parliament, said the BoJ will review its bond tapering plans at the next policy meeting on June 17, taking into account feedback from bond market participants. Additionally, he pointed out that sharp movements in long-term yields could influence short-term rates.
• Against this backdrop, it remains to be seen whether the current 10-year yield level will be sufficient to draw strong demand in today’s auction.
• Results are due at 0435 BST / 1235 JT.

The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 10-year JGBs. The MoF last sold 10-year debt on 8 May 2025: the auction drew cover of 2.5440x at an average yield of 1.274%, an average price of 101.10, a high yield of 1.294%, a low price of 100.92, with 44.9598% of bids allotted at the high yield.

• Last month’s auction revealed weak results, with the low price falling short of expectations, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 2.5440x from 3.1475x, and the tail lengthened to 0.18 from 0.11.
• This performance came with an outright yield 10-15bps lower than the prior month and approximately 30bps below the recent cyclical high of 1.596% reached in late March, just before President Trump's announcement on reciprocal tariffs.
• Results are due at 0435 BST / 1235 JT.

At the Tokyo lunch break, JGB futures are weaker, -17 compared to the settlement levels.

• Bank of Japan Governor Ueda, speaking in parliament, emphasised that trade uncertainties remain extremely high and are unlikely to ease even after tariff issues are resolved. He noted that the BoJ's baseline economic scenario could change significantly due to external conditions. Ueda reiterated there is no preset plan for interest rate hikes, which will only occur if economic and price conditions improve as expected. Despite this, the bias remains toward further rate increases. He also said the BoJ will review its bond tapering plans at the next policy meeting on June 17, taking into account feedback from bond market participants. Additionally, he pointed out that sharp movements in long-term yields could influence short-term rates.
• Note as well Governor Ueda will speak later today at 4:50pm local time.
• Cash US tsys are flat to 1bp cheaper, with a steepening bias, in today's Asia-Pac session after yesterday's sell-off.
• Cash JGBs are 1bp cheaper to 2bps richer across benchmarks, with a flattening bias. The benchmark 10-year yield is 0.9bps higher at 1.522% ahead of today's supply.
• Swap rates are flat to 1bp higher. Swap spreads are mixed.