JGB's head into the close in positive..........>

JGBS: JGB's head into the close in positive territory, now some 25 ticks higher

on the week at 151.06. JGB's rose during the overnight session despite the

declines in US tsys. This move accelerated at the open and futures took out the

Aug 24 high and the May 1 high at 151.01 and 151.08 respectively, briefly

touching 151.10 before pulling back slightly.

- CPI data was ignored, broadly in line with expectations as core CPI picked up

0.1ppts to 0.5% in July. A surprise from the BoJ came when they cut 5-10 Year

purchases by Y30bln to Y410bln, levels last seen on January 23. Despite the move

reaction was the opposite of what was expceted, 10-Year yields are last down

0.9bp at 0.015%, earlier dropping as low as 0.004% in thin trade. 

- Sources note that foreign & dealer demand ahead of fiscal half year end on

Sept. 30 is driving demand despite the reductions.

- ASW outperformed yields in the long end, the 20-Year sector seeing a sell off

after heavy buying this week. USD/JPY basis swaps narrowed after widening

yesterday, despite another 1.1bp drop in yields in the sector.