JGBS AUCTION: 30Y Supply Absorbed With Solid Demand Metrics

NZGBs closed 1-2bps cheaper after a relatively subdued session. In relative terms, the NZGB 10-year’s performance was mixed, with the yield differential to US tsys 2bps wider but unchanged against ACGBs. 

• Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
• Today, the local calendar was empty ahead of ANZ Commodity Prices, the sole release for the week.
• Swap rates are 1-2bps higher.
• Swap rates closed flat to 2bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed little changed. 52bps of easing is priced for February, with a cumulative 127bps by November 2025.

The 10-year JGB auction delivered solid results, with the low price beating expectations at 100.50, according to the Bloomberg dealer poll. The cover ratio also jumped to 3.3570x from 3.1156x in the previous auction, while the tail shortened to 0.01 from 0.05, indicating stronger demand.

• This better performance came with the auction offering an outright yield at a fresh cyclical peak of 1.14%, roughly 6bps higher than last month. Additionally, the yield curve between 2- and 10-year bonds had steepened by about 5bps compared to the prior month.
• Weaker sentiment toward global long-end bonds and expectations of further near-term tightening by the BoJ didn’t appear to weigh significantly on demand.
• In early afternoon Tokyo trading, the cash 10-year JGB is 1.5bps richer from pre-auction levels, while JGB futures have gapped higher to session highs. 

The Japanese Ministry of Finance (MoF) sells Y1,963.5bn 10-Year JGBs:

• Average Yield: 1.140% (prev. 1.084%)
• Average Price: 100.53 (prev. 98.37)
• High Yield: 1.141% (prev. 1.089%)
• Low price: 100.52 (prev. 98.32)
• % Allotted At High Yield: 91.7315% (prev. 20.3093%)
• Bid/Cover: 3.3570x (prev. 3.1156x)