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Another muted/non-existent reaction to the.....>

JGBS
JGBS: Another muted/non-existent reaction to the BoJ's decision to cut bond buys
in the 5-10 Year range. The bank dropped purchases by Y30bln to Y410bln, a level
last seen on January 23, cutting from Y500bln on July 18.
- The BOJ wants to slow the rise in its Japan government bond holdings to make
an eventual unwinding of its aggressive easing policy smoother but is being
extra careful to ensure that smaller JGB purchases do not ignite a rise in the
yen exchange rate. The bank took the opportunity to cut today with yield levels
at the lowest since May 2 at 0.02%. The BoJ will also be cautious of yields
below the 0.00% target for the 10-Year as they want to avoid flows into duration
so they can steepen the curve.
- A common theme in JGB's has been scarcity of bonds with the latest 5-10 Year
operations seeing tight bid/covers and wider negative spreads, indicating JGB
holders are more reluctant to part with the securities.
-  Yields hit a low of 0.008% in April, yet the BoJ refrained from altering the
ops. This could have been due to the level of the yen (USD/JPY: 108.43) and/or
to current low volatility in quiet JGB markets (last 1.64 vs 2.07 in April)

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