Barclays "exp. JGB yields to remain............>

JGBS: Barclays "exp. JGB yields to remain suppressed in the week ahead. Risk-on

flows have been subdued in the wake of the US-China summit & bond yields in

major mkts continue to trend downward. The rise in yields seen after the BoJ's

July MPM has reversed entirely in the short/medium-term sectors & retraced more

than halfway in the long/superlong-term sectors. Such moves reconfirm the rise

in UST-JGB beta for periods of declining yields as well. The swap curve also

declined sharply, led by the medium-term sector, on the back of a continuous

decline in JPY LIBOR. Looking ahead, the BoJ's tapering of JGB purchases & its

tolerance toward higher long-term yields in the context of relative stability in

USDJPY, which has been supported by US economic outperformance & technical

supports, should limit the pace of any decline in yields to some extent,

especially given the already low levels. In this environment, we expect JGB

yields to stay in a low range over the near term. However, if declines in UST

yields begin to translate into a lower USDJPY, the scope for a BoJ reaction may

become more limited, exerting stronger downward pressure on JGB yields. JGB mkts

should remain vulnerable to two-way volatility depending on overseas dynamics."