JGB futures once again edged away from.........>

JGBS: JGB futures once again edged away from support around the 150.00 region,

with participants focused on the upcoming 10-Year JGB auction. Early dealing saw

little in the way of concession being built into the space, with yields edging

lower and some modest curve flattening apparent. That was before 10-Year paper

softened into the lunchbreak, as futures moved back from session highs.

- From a RV perspective the 10-Year sector trades rich in ASW terms vs. the

20-Year b'mark, but holds slightly more appeal than 7-Year paper. The same holds

true in z-spread terms. 20-Year paper also offers a more attractive carry & roll

prop. This auction will draw attention after the BOJ's recent reduction to both

the lower & upper bounds of its 25+ Year JGB purchases for the month of Oct. The

alterations to the BOJ's super-long purchase plan may mean that funds decide to

allocate more capital to 10-Year paper, at least in the short-term. There seems

to be a lack of short covering requirements at the auction, although the lack of

conviction in establishing fresh shorts could prove to be supportive.

- There was also some focus on Samurai issuance with SocGen set to price 5- &

10-Year paper & BFCM set to price and 5-, 7- & 10-Year paper.