### JGB's dropped in the afternoon session.....>

JGBS: ### JGB's dropped in the afternoon session despite a decent 5-Year

auction, sources noted that pre-auction shorts were sparse due to the run higher

in futures (the 5-day gain denoting the longest winning streak since April)

which resulted in heavy short hedging post auction. The recent drop in yields

after the buying streak, which has been attributed to an unwind of flattener

shorts established in June has garnered speculation that the 5-10 Year purchases

could be reduced further today, with one source speculating a drop to the

Y410bln level that was the norm up until January.

- This would be a bold move from the BoJ after reducing purchases to Y440bln

below the usual Y450bln after the jump to Y500bln in July. But BoJ purchases did

rise to Y7.4tln from Y7.2tln in July, bucking the decreasing trend so far in

2017 and comes as supply and demands are tight with the BoJ seeking to keep

ammunition for the YCC in reserve should the economic climate change, and the

BoJ will be emboldened by the sanguine nature with which the market digested the

cut earlier this week.