JGBS AUCTION: Poll: 30-Year JGB Auction

The Japanese Ministry of Finance (MoF) will today sell Y2.4tn of 5-Year JGBs. MoF last sold 5-year debt on 13 November 2025, with the auction drawing cover of 3.3258x at an average yield of 1.245%, an average price of 100.25, a high yield of 1.251%, a low price of 100.22, with 31.6009% of bids allotted at the high yield.

• Last month’s 5-year bond auction delivered mixed demand signals. The low price was in line with expectations at 100.22, but the bid-to-cover ratio fell to 3.33x from 3.69x, while the tail narrowed to 0.03 from 0.06. The result was broadly consistent with the subdued demand seen at November’s 10-year auction.
• However, this month’s 10-year bond sale showed strong demand metrics, with the low price beating expectations at 98.50, according to the Bloomberg dealer poll. Moreover, the cover ratio increased to 3.5913x from 2.9734x, and the tail shortened to 0.04 from 0.13. This performance came with an outright 10-year yield at a fresh cycle high, around 20bps above the level in the prior month's auction.
• Results are due at 0335 GMT / 1235 JST.

While the RBA is unanimously expected to leave rates at 3.6% today, there are a range of views regarding the tone of the statement and Governor Bullock’s press conference. Some believe there will be little change as the Board desires to keep its options open while waiting for more data, especially Q4 CPI on 28 January. Others think there will be a hawkish shift. The AUD OIS market has about a 50% chance of a hike priced in for May and 30bp by August but many believe it is too early to be considering tightening.

• Goldman Sachs expects a slight hawkish shift in the December statement given the strength of the data since last month and the November one was not as concerned as it could have been given Q3 CPI. It expects more worry over the “persistence of inflation” and for the RBA to sound more positive on activity.
• GS believes Bullock will be “increasingly circumspect around the RBA’s assessment of the restrictiveness of financial conditions given the recent data flow” and “will note greater evidence of inflationary pressure”.
• However, JP Morgan expects little change to the RBA’s sentiment and that the rise in October inflation to be downplayed as it “does not significantly threaten the RBA’s standing forecast for 4Q (3.5%oya)” given the “softer trajectory” implied by Q3 CPI details.
• In response to a likely question on hiking, JP Morgan expects Bullock to reiterate a commitment to returning inflation to the band and the Board’s data dependency.
• AMP expects the statement to be “more hawkish” but downplay the rise in the new monthly CPI in October. It also thinks that it is likely “to state that it will do whatever is necessary to bring inflation back to target, leaving the door wide open for a hike next year”.

The overnight range was 89.69 - 90.08, Asia is currently dealing 90.05, +0.02%.This pair is now probing the pivotal 90.00 area, can it break above and gain momentum to extend ? It has started playing catch up to the likes of AUD/JPY but in my mind I suspect it still has more to do. NZD/JPY should do some work around this tough resistance toward 90.00-90.50, a sustained break back above these levels could potentially see this pair start to gain momentum to the topside again, first target is 92.75-93.50 and then beyond.

• The NZD/JPY Average True Range(ATR) for the last 10 Trading days: 57 Points

Fig 1 : NZD/JPY Vs AUD/JPY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P