JGB futures moved back to highs on Thursday....>

JGBS: JGB futures moved back to highs on Thursday after the BOJ announced that

it will buy some Y400bn worth of 5-10 Year JGBs late in the session (smaller

size than the most recent Rinban operation covering that bucket, Y410bn). The

unscheduled operation did not cover the benchmark #JB351 10-Year JGB, which was

auctioned earlier today. The fact that the operation had a fixed size & didn't

hold a fixed rate suggests that the BOJ may be trying to quell vol., not limit

the rise in yields at current levels.

- This was after the space slipped in early afternoon dealing on the back of the

latest 10-Year JGB auction. Although the bid-to-cover held up, there was a 1.2bp

gap between the average & high yield, underscoring the scepticism that some held

heading in on the back of the recent run of volatility in the space. Some

48.9994% of the paper was allotted at the high yield, up from the prior

38.2288%. The low price of the auction was also significantly softer than

expected at 99.62 vs. exp. 99.73. JGB's couldn't manage a break of the early

session lows on the move.

- Focus will fall on today's Rinban ops covering 5-25+ Year paper.