HALISTER1: Japan 20Y Govt Bond Sale May Fetch 100.65 Cut-Off Price: Survey

Japan 20Y Govt Bond Sale May Fetch 100.65 Cut-Off Price: Survey

(Bloomberg) -- Japan sells 1.1t yen ($10.1b) of 0.5% 20-year govt bonds maturing Sept. 2036.
  • Lowest accepted price seen at 100.65, based on median est. of 13 traders surveyed by Bloomberg
    • Five forecast 100.65, four estimate 100.70 while the rest expect 101.60, 101.55, 100.85 and 100.80
    • Finance Ministry announces results at 12:45pm Tokyo time
  • Debt to be auctioned today fetched 101.042 on Nov. 16 in when-issued trading: JSDA data
  • Deutsche Securities recommends aggressively buying 20-year bonds at the auction, says Makoto Yamashita, chief Japan interest rate strategist in note today; reasons cited include:
    • Lack of long-term sustainability for positive 10-year yields; BOJ can easily stop rising rate; see 10-yr yield remaining positive for no more than 2-3 weeks
    • Attractiveness of rolling down 10- to 20-year spread above 40bps if 10-year yield is depressed to near zero
    • Govt is expected to lower planned FY17 JGB issuance, centering on refunding bonds
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Makoto Yamashita (Deutsche Bank AG)

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