JGB's dropped sharply again, feeling the.......>

JGBS: JGB's dropped sharply again, feeling the after effects of the BoJ decision

to cut purchases in the 10-25 Year and 25+ Year JGB's yesterday. Some market

players who ascribe to the "stealth tapering" hypothesis attributed the reaction

to the fact that the 10-Year yield was hovering around 0.05%, 5bp above the YCC

target and reason that the willingness to let the yield rise indicates a change

in bias from the BoJ and could be a precursor to a change in the yield target. 

- The move over the past 2 days has reversed the flattening seen after the MOF

announced a cut to long end supply in 2018, 10-/40-Year spread now 0.8bp wider

in the past month after flattening 5.5bp during December. JGB futures head into

the close down 28 ticks at 150.35, yield sharply higher across the curve with

the futures sensitive belly of the curve leaving the move after the 10-Year

auction. 10-Year yield now up 1.7bp on the session at 0.088% to hit the highest

level since July 2017.

- The 10-Year auction was taken down well, a 1.9bp yield concession helping firm

the results despite the obvious downside risks for prices. Cover rose to 3.74

from 3.70 previously, while the low price was higher than the estimate.