What are “switch auctions” that have sparked debate on JGB market?
Key points
- June PD meeting discussed introducing “switch auctions” as way to address declining liquidity for super-long, off-the-run JGBs
- Switch auctions used in Italy and other advanced economies; similar system implemented in Japan when issuance of inflation-indexed JGBs was resumed
- Purchases of super-long, off-the-run JGBs need to consider consistency with liquidity enhancement auctions; focus on opinions at Sep 24 PD meeting