JGB futures continue to operate in a tight.....>

JGBS: JGB futures continue to operate in a tight range, in the early part of the

Tokyo afternoon.

- The long end of the curve has underperformed, promoting some modest steepening

in early afternoon trade after a less than inspiring liquidity enhancement

auction for off the run 15.5-39 Year JGBs saw the cover ratio moderate, as the

average spread moved into positive territory.

- This comes after the BoJ had to trim the size of its 10-25 Year JGB purchases

earlier this month owing to the flatness of the curve & suppressed outright

yield levels, which has triggered speculation of additional tweaks to Rinban

ops. That hasn't stopped the latest round of longer dated auctions from coming

in on the firm side, with many suggesting that lifers have found themselves

underweight super-long JGBs as we head towards FY end. Today's auction result

could highlight a preference for on the run paper at lifers.