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Fixed Income Commentary

Intriguing RV graphs: No widening for medium-term JGB asset swap spread despite increased issuance speculation

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Intriguing RV graphs: No widening for medium-term JGBasset swap spread despite increased issuance speculation

Key points
  • MoF increasing issuance of short/medium-term JGBs in FY25, while reducing issuance of super-long JGBs; similar trend expected in FY26
  • Likewise for net JGB supply (= issuance - BoJ purchases), but asset swap spreads widened significantly for super-long zone, while widening only moderately for medium-zone
  • Unlike super-long JGB buyers, medium-term JGB buyers do not demand high premiums; scope for medium-term JGB asset swap spread expansion seems limited for now
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