JGB's head into the close lower, dropping......>

JGBS: JGB's head into the close lower, dropping from the open as the Nikkei 225

gapped higher on a weaker yen. JGB futures held their losses and continued to

trend lower in the afternoon even as the Nikkei dropped into negative territory

as yen strengthened in broad risk off in Asia.

- The BoJ conducted purchase operations in the <1 Year, 1-3 Year and 3-5 Year

zones. All sizes were kept unchanged. While offer/cover dropped on reduced

speculation of a reduction in the sector, spreads widened slightly, which

contributed to downside in futures.

- Data was ignored, early in the session Japanese Services PPI was released. The

headline figure fell to 0.8% in October from 0.9% previously.

- Yields rose across the curve in Japan. The curve bear flattened, the long end

more resistant to selling after the sharp sell off last week. Markets look ahead

to the 40-Year auction tomorrow. Futures sensitive sector led the sell off,

yield last down 1.1bp at 0.04%.

- Swaps seeing some paying pressure in the long end, 40-Year swap rising 1.125bp

to 0.96125%