JGB's head into the close lower after..........>

JGBS: JGB's head into the close lower after dropping sharply in the afternoon

despite the lack of macro catalysts. Bonds were steady during the morning

session, shrugging off a rise in the trade balance surplus and robust

export/import data with an 8th straight gain for exports and a 7th straight gain

for imports.

- The MOF sold 3-Month and 5-Year debt, the 5-Year was taken down well despite a

4.7bp drop in yields, though cover dropped from the July auction which was at a

two-year high. Sources noted that the sector demand is mainly held down by

dealers, which is consistent with the sustained demand for the issue sold (132)

in the BoJ SLF programme. Despite the decent auction the afternoon session saw

JGB's fall to 150.59 after hitting 150.70 initially after the auction. The BoJ

purchase operations in the 1-10 Year sectors are in focus, especially after the

BoJ took the opportunity to cut the sizes on Wednesday. 

- Yields head into the close higher, the belly rising more than the wings.

2-Year yield last 01bp at -0.11%%, 10-Year yield last up 0.8bp at 0.047%,

40-Year yield last -0.1bp at 1.08%.