Mizuho Securities previews the JPY 2.6 trillion 10y JGB auction, noting that while yields are at attractive levels, market sentiment is dampened by political uncertainty regarding fiscal expansion and potential BOJ rate hikes.
Key Takeaways
- 1.The upcoming 10y JGB (JB381) auction faces a conflict between high absolute yields/relative cheapness and macro policy uncertainty.
- 2.10y JGB yields have reached 2.25%, significantly higher than January levels, which may attract buyers despite BOJ hike fears.
- 3.Fiscal concerns are rising due to the LDP's election platform, which includes a potential JPY 10 trillion consumption tax cut.
Table of Contents
- (1) Positives and negatives ahead of the 10y auction
- POTENTIAL POSITIVES
- POTENTIAL NEGATIVES
- (2) Auction strategy
- CONSIDER ASSET SWAPS WITH AN EYE TO THE MEDIUM TERM
- (3) Key charts
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Authors
Noriatsu Tanji
Securities
10y JGB (JB381)
Themes
Fiscal Expansion RiskMonetary Policy Normalization
Regions
Asia PacificJapan
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