20y JGB Auction Preview

Mizuho previews the upcoming 20-year JGB auction, suggesting that current yields above 3.7% should provide support despite risks from the US-Iran conflict and BOJ hawkishness.

Key Takeaways

• 1.Current 20y JGB yield levels (3.715%) are significantly above the April average and the 3.5% psychological threshold, which should attract absolute income-minded investors.
• 2.Relative value metrics show the 20y sector has cheapened against 10s, with 10s20s spreads widening, potentially inducing demand from relative value players.
• 3.Geopolitical uncertainty between the US and Iran remains a major negative, with WTI crude above USD100/bbl posing inflation overshoot risks.

Table of Contents

• (1) Positives and negatives ahead of the 20y auction
• POTENTIAL POSITIVES
• POTENTIAL NEGATIVES
• Pre-auction comment²
• (2) Key charts
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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