/JAPAN: And BMO's Aaron Kohli on 5Y......>

US TSYS/5Y: /JAPAN: And BMO's Aaron Kohli on 5Y note demand noted that

"seasonally, October-November is when Japanese flows normally turn positive

(we've seen positive flows in each of the last ten years from late October

through November). This should act to bolster 5-year auction demand and bring

foreign buying off depressed levels. Foreign takedown fell in September to the

lowest since December at 9.5%." 

- He adds "the 5-year is among the first parts of the curve to price in hawkish

Fed rhetoric and then often tends to outperform as the Fed's bark ends up being

worse than the bite." 

- Finally "5-year future spec positions are at a historic low at -16% of open

interest in short contracts," Kohli said. "This notably large (though not

extremes) short base raises the risk of a squeeze. Extreme short levels would be

closer to 20-22% of open interest." 

- Meanwhile "Fed buying will be low at $0.9 bn, however this is due to Fed

tapering which was been well known," he said.