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CHINA/JAPAN: Buyers are streaming back......>

US TSYS: CHINA/JAPAN: Buyers are streaming back into US Treasury market from
Asia, once again, and it's making a difference. This Asian flow is from China as
it return from Golden week holidays last week, and Japan as the new fiscal half
year gets underway. - MNI thinks this flow will continue near term as contacts
tell us yield stability is key for such clients to be drawn into Tsys, and
stability is amply demonstrated by the contained level of MOVE index of Treasury
mkt volatility. - One good indicator is tonight's Japanese MOF data of foreign
bond buying flows. The last data, out Oct. 5th, showed a large $10Bln OUTflow
from foreign bonds through week of Sept. 29th, as often occurs into
half-year-end close, said BMO analyst Aaron Kohli, "the largest since late
April." - "We have been writing that seasonally by end-October, you have a big
flip in Japanese flows on Treasuries, and they will essentially start buying,"
Kohli said. "We are basically watching tonight's data to see if that turn has
occurred. If the MOF data reflects this turn in Japanese flows in foreign bonds,
we will conclude that buying has started."

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