40y JGB Auction Preview

Mizuho previews the upcoming JPY 300bn 40-year JGB auction, suggesting that high absolute yields (>4%) and supportive seasonal cycles favor outright long positions despite geopolitical and fiscal uncertainties.

Key Takeaways

• 1.The Ministry of Finance (MOF) is set to auction approximately JPY 300 billion of the new 40-year JGB (JU19), with supply halved since March 2025.
• 2.Current 40-year yield levels exceeding 4% are viewed as attractive given Japan's estimated 0.5% potential growth rate.
• 3.Historical seasonality in late May tends to be supportive for 40-year JGB auctions as duration extension trades offset early-month upward pressure.

Table of Contents

• Positives and negatives ahead of the 40y auction
• POTENTIAL POSITIVES
• POTENTIAL NEGATIVES
• Pre-auction comment²
• OUTRIGHT LONGS
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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