JGB's went into the close slightly higher......>

JGBS: JGB's went into the close slightly higher yesterday after recovering from

a morning session drop following a strong 20-Year auction which also saw the

curve twist flatten as participants bought further down the curve, sources note

the early softness/subdued reaction in futures means futures were likely sold to

buy the 20-Year paper. The auction saw the highest cover since Jan 2014 with the

smallest tail in 2017 so far at 0.03. The favourable carry/roll in the sector

was cited by many as a factor in the strong demand.

- JGB's gained sharply over July and early August, but the rally seems to have

run out of steam recently, OI increased by 2.3k yesterday and is up by 5k since

Friday moving above the 15-DMA with sources suggesting the skew could be to

short positions which held back futures yesterday.

- JGB Opening Call Barclays: "Today could see the curve change direction and

bear-steepen on improving risk sentiment after USTs were sold overnight. The BoJ

is scheduled to hold buying operations for 1-5y and 10y+ issues today. Whether

there is a reduction in the operation for 1-5y issues will be one focus."