Japan’s Ministry of Finance sold 248.9 billion yen of reopened government bonds on Tuesday in its liquidity enhancement auction for JGB Market Special Participants. Bids totalled 990.3 billion yen, roughly four times the amount accepted. The highest accepted spread and the average accepted spread were both minus 0.001 percent against the reference rate, and bids at the highest accepted spread were allotted at 90.4883 percent.
The reopenings were concentrated in older long-dated lines. Four 20-year issues took 181.2 billion yen between them, led by 115.3 billion yen in the No. 179 issue. Ten 30-year issues took 19.6 billion yen in small clips, and seven 40-year issues took 48.1 billion yen, led by 32.6 billion yen in the No. 4 issue. The bonds are issued on October 28.
Liquidity enhancement auctions exist to keep off-the-run JGBs tradeable by topping up issues the market has moved past, and their spreads are the cleanest read on whether that support is needed. A negligible accepted spread, with the average and the stop identical, says dealers were willing to take the superlong tail at essentially reference pricing. The result lands in a busy fortnight for Japanese supply: the ministry auctions about 250 billion yen of five-year Climate Transition JGBs on November 2, as Monday’s edition reported, and the Bank of Japan decides policy on Friday, October 30.