JGB's head into the close with futures down....>

JGBS: JGB's head into the close with futures down 1 tick at 150.76. after

initially dropping in early trade alongside a sluggish move in US tsys as risk

on sentiment took hold in Asia. After bouncing off lows at 150.69 for the second

day in a row futures gained to 150.76 last.

- The 20-Yr auction was taken down well with the highest cover since Jan 2014,

the tail dropping to 0.03 - the lowest in 2017 so far. The strong result

initially saw futures sell off with buying evident further down the curve in

cash, before putting a bid under futures on some short covering. Regional banks

are said to have been active at the auction, JSDA data yesterday showed they

continue, along with credit banks, to be the most active in long bonds.

- Yield curve flattens again with the Nikkei dropping into negative territory in

the afternoon session supporting the bid in long term JGB's. 10-Year yield was

the biggest mover, last up 1bp at 0.041% with sources noting decent interest in

swaps in the sector, and general swap flatteners going through.

- USD/JPY basis swaps have continued to flatten, the 30-Year now down 5.75bp in

the past month while the 10-Year is broadly unchanged.