JGB's finished lower yesterday, dropping.......>

JGBS: JGB's finished lower yesterday, dropping into negative territory after

making early gains. The BoJ bought 5-10, 10-25 and 25+ Year JGB's, offer/cover

rose in the 5-10 sector in particular which added downside pressure in the

afternoon session. In the cash bonds the 20-Year sector saw heavy selling,

sources noted some concession ahead of the 30-Year auction later this week as

well as large selling to the BoJ of the OTR 20-Year issue.

- In Tokyo trade on Tuesday JGB futures are down 2 ticks at 150.45.

- JGB outlook from Barclays: "Today could see a slight tone of adjustment in the

short/mediumterm sectors prior to the 5y auction (JS134), but we expect the

auction to clear smoothly and the market to come back in the afternoon. The bond

should attract a certain level of demand given that recent yields (WI close on

15 January: -0.08%) are higher than the average at the last auction (-0.104%),

the MoF is planning to reduce 5y issuance relatively sharply in FY18, and

valuations appear increasingly cheap in terms of both level and relative value."