30y JGB Auction Preview

This report provides a preview for the upcoming 30y JGB auction, identifying fiscal policy concerns as a headwind while noting that limited BOJ terminal rate upside makes the sector attractive for medium-term holding.

Key Takeaways

• 1.The 30y JGB market faces downward pressure from fiscal concerns, particularly government plans for 'bridging bonds' and tax rate adjustments, creating near-term volatility.
• 2.Market pricing of the BOJ's terminal policy rate near the top of the neutral range (2.5%) limits scope for further hawkish repricing, potentially increasing the relative appeal of super-long bonds.
• 3.Despite near-term volatility, there is limited room for super-long yields to climb over the medium term due to the MOF's debt issuance strategy and potential inflation cooling.

Table of Contents

• Positives and negatives ahead of the 30y auction
• POTENTIAL POSITIVES
• POTENTIAL NEGATIVES
• Auction strategy
• 30Y ASSET SWAPS AND/OR OUTRIGHT LONGS WITH A MEDIUM-TERM HORIZON
• Key charts
• Important Disclosure Information
• Analyst Certification
• Disclaimer