JGB's head into the close higher, following....>

JGBS: JGB's head into the close higher, following the same pattern as yesterday

by treading water in the morning and catching a bid in the afternoon session to

hit highs of 150.68, highest  since June 6. Futures last up 8 ticks at 150.65.

- The big news of the session was the reduction in the BoJ purchase op in

5-10Yrs by Y30bln to Y440bln. The BoJ had increased purchases by Y50bln on July

7 to stem the rise in yields, which have now dropped around 6bp. The action

surprised markets slightly as, though a reduction was expected at some point,

few anticipated a drop below Y450bln. A reduction was necessary due to tight

supply demand and conditions in the sector, Nomura analyst Takenobu Nakashima

notes that the bank have made this move to capitalise on the lack of volatility

as Japan and US have no important events this month which explained the almost

complete lack of reaction. Nakashima adds that "JGB's supply/demand is very good

in this week" which also provided opportunity for the reduction in the op. 

- Yields curve twist steepening, long end seeing some selling after a spate of

dip buying on the close yesterday, with the short end selling ahead of the

5-Year auction tomorrow. 10-Year yield last -0.5bp at 0.047%