Japan’s Ministry of Finance completed its 5-year JGB auction on Wednesday, selling issue number 188, a 2.4 percent coupon bond maturing on September 20, 2031 and issued on October 15. The lowest accepted price was 100.07 per 100 yen, a yield of 2.384 percent, and the weighted average price was 100.09, a yield of 2.379 percent, a tail of half a basis point between average and stop.
Demand was solid on the ministry’s figures. Competitive bids totalled 6,818.2 billion yen, of which 1,915.1 billion yen were accepted, a bid to cover ratio of about 3.6 times on competitive bids. Allotment at the lowest accepted price was 40.4279 percent. A further 583.7 billion yen was accepted at the non price competitive auction for JGB market special participants, and 0.560 billion yen in ordinary non competitive bids.
The level is the story. A 5-year JGB clearing at 2.38 percent, with the Bank of Japan’s policy rate at 1.25 percent and households in the BoJ’s own survey overwhelmingly expecting prices to keep rising, embeds a path of further normalisation into the front end of the Japanese curve. The auction landed without a concession blowout a fortnight before the October 29 to 30 BoJ meeting.
For global rates, Japanese 5-year paper at these yields continues to change the home bias arithmetic for Japanese investors, the slow moving force behind foreign bond selling earlier in the normalisation. Wednesday’s result says that repricing is being absorbed in orderly size.