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

JGBS
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.

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