JGB's finished slightly higher yesterday but...>

JGBS: JGB's finished slightly higher yesterday but saw quiet, broadly

directionless trade ahead of the FOMC meeting. The BoJ bought 1-10 Year JGB's,

all sizes were unchanged but the operations saw higher offer/covers and JGB's

sold off slightly. The long end sold off after heavy buying earlier this week

and in a set up for the 20-Year auction today.

- FOMC voted 7-2 to hike rates 25bp, UST's rose and curve bull steepened.

- JGB Opening Call Barclays: "Today could see buyers initially take the upper

hand given the overnight rally in USTs. We look for the 20y auction (JL163) to

produce somewhat strong results even at yields near current levels. Those levels

(WI close on 13 December: 0.58%) are slightly higher than at the last auction

(0.573%). Also, 1) superlong JGB supply and demand is scheduled to tighten

through year-end; 2) superlong JGBs have become increasingly attractive relative

to FXhedged USTs; and 3) speculation around BoJ normalization has taken a

breather. In this context, we believe the auction is likely to spur firm demand

from a wide range of investors"