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3h ago

Japan Proposes Cutting Super-Long JGB Auctions to ¥250 Billion, Redirecting Supply to Shorter Notes

Primary dealers largely support the shift to shorter maturities.

A woman is reflected on an electric board displaying Japan's long-term government bonds level and Japanese Yen rate against U.S. dollar and other currencies outside a brokerage in Tokyo, Japan January 16, 2023. REUTERS/Kim Kyung-Hoon/File Photo
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Overview

  • Japan’s finance ministry proposed reducing issuance of off-the-run 15.5–39 year JGBs in liquidity enhancement auctions to 250 billion yen per sale from 350 billion yen and reallocating the difference to 1–5 year bonds.
  • A finance ministry official said the plan won wide backing from primary dealers, who pointed to a poor supply–demand balance in super-long bonds.
  • The ministry reiterated it is not currently implementing buybacks of previously issued low-coupon super-long JGBs, citing challenges to launching such a step.
  • Short-term JGB yields jumped to their highest since the global financial crisis after two Bank of Japan board members voted for a rate hike, while long-end yields have eased.
  • Foreign investors, net buyers of super-long JGBs for eight straight months through August with a record 2.3 trillion yen in April, stand to benefit from the yield-curve flattening.