JGB's rose during Tokyo yesterday despite......>

JGBS: JGB's rose during Tokyo yesterday despite the slight drop in US tsys,

gaining for the 5th consecutive session. The curve twist steepening with the

superlong sector seeing some selling. Sources note an unwind of some flattening

trades which has seen gains in JGB futures which have run contrary to UST's. The

BoJ reduced purchases in the 5-10 Year sector to Y440bln, taking advantage of

lack of volatility with the larger than expected reduction being attributed to a

desire to keep powder dry for a rainy day; ultimately reaction was limited. 

- JGB Opening Call Barclays: "Today could see yields fall slightly, especially

in the long end, after the switch to the buy side in USTs overnight. We see no

need to be particularly aggressive at today's 5y JGB auction (JS132) around

current levels (WI close on 16 August: -0.08%). Given the steady provision of

JS132 through the BoJ's Securities Lending Facility, there appears to be a

certain level of short-covering demand. In this context, we expect the auction

itself to go smoothly. However, it may be difficult to expect much in the way of

post-auction performance. The current 5y bond yield is near the lower bound of

its range since July and we believe any further downside will be limited."