An eventful session for JGB's, futures head....>

JGBS: An eventful session for JGB's, futures head into the close down 9 ticks at

150.63, off session lows of 150.59. JGB's were on the back foot from the off as

the risk on tone from Monday (Japan was closed for Coming of Age Day) and a

positive lead from the US session took its toll, strong wage growth data also

added downside pressure. The big move lower came after the BoJ cut purchase ops

in 10-25 Year and 25+ Year sector by Y10bln each. Though similar moves have not

garnered such a reaction this cut in ops was interpreted as tapering from the

BoJ and saw a sell off in JGB's and yen strength. Yields in the 20-40 sector

rose to the highest levels in a month. Opinions are mixed as to the intent of

the BoJ, some say that this is to reverse recent yield curve flattening and the

Bank are simply adjusting YCC. Others note that yields in the targeted sectors

were lower before Christmas and so the timing is slightly fishy. Economic

indicators from Japan have been stronger and 10-Year breakeven rates have risen

to 0.611%, the highest in a year, could support the "stealth tapering" theory.

- Yields higher across the curve, which steepens after the BoJ cut, 10-Year

yield up 0.8bp at 0.068%, 2-/40-Year spread 1.6bp wider.