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

JGBS: JGB's head into the close higher, JGB futures are up 12 ticks at 150.89,

just off session highs at 150.91, the highest level since May 8. A strong

enhanced liquidity auction in the 5-15.5 Year sector spurred a bid in safe haven

assets after US tsys saw strong buying in the previous session. The upside move

was supported by weakness in Japanese equity markets and a gain in the yen

overnight.

- Buying has been focused around the belly, with the on the run 7-Year (#335)

which is currently the CTD 10-Year JGB future has seen heavy buying, yield down

1.2bp at -0.067%, the 10-Year yield last down 1.2bp at 0.024% touching the

lowest level since May 8. The 20-Year yield, already subdued due to favourable

carry/roll, dropped to the lowest level since December at 0.533%. The

10-/20-Year spread is just off the lowest levels of 2017 so far at 50bp.

- The BoJ will purchase 5-10 Year debt tomorrow, which after the reduction in

cover and wider spreads at the Rinban ops earlier this week also supported the

bid this afternoon with speculation of a further reduction in the sector at

these low yield levels. Markets also look ahead to CPI tomorrow.