JGBs were initially pressured by the latest....>

JGBS: JGBs were initially pressured by the latest tweaks to the BoJ's Rinban ops

& adjustments to the Oct Rinban outline (both announced yesterday, with the aim

of promoting curve steepening). This pressured the space early on, as bear

steepening came to the fore for a 2nd consecutive session. The move extended in

early afternoon trade, with a very weak 10-Year auction seen; widest 10-Year

tail since '15, avg. price was below exp. of low price (proxied by the BBG

dealer poll) & the cover ratio edged lower, printing at levels not seen since

'16. The steepening quickly gave way to some underperformance in the belly on

the back of the supply. Meanwhile, the JSCC noted that an emergency margin call

was triggered for JGB futures. The contract has recovered from worst levels, but

still sits 60 or so ticks lower on the session. 10-Year yields are ~5.0bp higher

on the day.

- Locally, we saw several matters of note, namely the imposition of the

well-documented sales tax hike, the GPIF formally announcing that it will

classify FX-hedged foreign bonds as domestic bonds (broadening its scope for

investment in the space) & a less than inspiring BoJ Tankan survey.