20y JGB Auction Preview

Mizuho previews the upcoming 20y JGB auction, suggesting that while yields above 3.5% offer strong support, risks from the US-Iran conflict and BOJ hawkishness could lead to cautious bidding.

Key Takeaways

• 1.Current 20y JGB yields (~3.7%) are at levels likely to attract absolute-income investors, despite geopolitical and fiscal concerns.
• 2.Market participants are wary of a potential 'hawkish turn' by the BOJ in June, fueled by yen weakness and crude oil-driven inflation risks.
• 3.Fiscal deterioration concerns have emerged following reports of a potential supplementary budget, though MOF issuance capacity appears stable.

Table of Contents

• (1) Positives and negatives ahead of the 20y auction
• POTENTIAL POSITIVES
• POTENTIAL NEGATIVES
• Pre-auction comment
• CONSIDER TACTICAL OUTRIGHT LONGS AS WELL AS LONGER-TERM 20Y ASW PLAYS
• (2) Key charts

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