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 have moved lower in the wake of the supply, with futures sticking

to a tight range during the session. The strong auction showing 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 0.06% 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 BoJ's main policy option if there is a need for further easing, with Bank

officials unconvinced as to the benefit of extending quantitative easing.

- Focus Friday turns to Tokyo CPI & BoJ Rinban operations, which will cover 5-10

Year paper. BoJ Gov. Kuroda is set to speak in European hours Thursday.