Limited reaction in futures to the latest......>

JGBS: Limited reaction in futures to the latest 20-Year JGB auction, which saw

the cover ratio move higher, while the tail was very close to unchanged. The low

price of the auction was higher than dealers exp. (based on the BBG poll)

20-Year yields are modestly lower.

- Strong auction may have been a result of the relative attractiveness vs. 10- &

30-Year JGBs, and the fact that the auction represented the opening of a new

line, with the potential for FY end window dressing also a likely source of

support. This seemingly outweighed the rich asset valuation vs. swaps and

multi-month flats in the 10-/20-Year JGB spread.

- Yields marginally higher out to 10-Years (10-Year JGBs yielding 0.010% at

writing), promoting some twist flattening as super-long yields hold lower.

- Also worth highlighting MNI understands that lowering real interest rates will

be the Bank of Japan's main policy option if there is a need for further easing,

with Bank officials unconvinced as to the benefit of extending quantitative

easing.