JGB's head into the close broadly flat,........>

JGBS: JGB's head into the close broadly flat, 10-Year futures last flat at

150.48. After initially trending slightly higher throughout the session to reach

session highs of 150.55 futures dropped back as Europe arrived. LCH/JSCC basis

spreads had dropped sharply on the session after foreign paying earlier in the

week had pushed spreads to highs of 9bp. The spread widened slightly as Europe

arrived suggesting foreigners sold JGB's and paid swaps in the futures sensitive

10-Year sector. Long end saw some decent buying after a strong 40-Year auction,

cover rose to 3.674 the highest since 2014 support by demand from real money and

life insurers. This saw buying in the long end which flattened the curve.

10-Year yield up 0.5bp at 0.074%, 40-Year yield 1.4bp lower at 1.002%. Short end

saw some buying as the BoJ conducted purchase ops in the sector, buying Y1.75tln

at wider spreads and sparking a bid.

- Elsewhere JGB CDS fell to the lowest level since March as tensions between the

US and North Korea ease with US president Trump signalling his willingness to

enter into talks. 5-Year CDS dropped to 23bp, JGB volatility also dropped during

the session after hitting 1.75 earlier this week.