###POV: BOJ LIKELY TO BE CLOSELY WATCHING.....>

JGBS: ###POV:  BOJ LIKELY TO BE CLOSELY WATCHING ELEVATED YIELD LEVELS,

CONDITIONS RIPE FOR INTERVENTION:

- 10-Year yield above 0.10% is in BoJ intervention territory, the Bank last

intervened in July when the yield hit 0.105%. The Bank have previously conducted

an unlimited fixed rate purchase at 0.11% in the 10-Year, but reaction in July

was limited, much smaller in fact than the reaction to recent tweaks in the

scheduled yield curve control purchase operations.

- The BoJ are scheduled to purchase 5-10, 10-25 and 25+ Year JGB's in their

operations today. Some speculation that the Bank plans to tweak purchases after

increasing 3-5 Year purchases by Y30bln on Jan 31.

- In addition to high yield levels the level of the yen is also seen as a

concern. While EUR/JPY has broken higher, a stubbornly weak US dollar has kept

USD/JPY subdued, last at 109.41.

- If the bank were to increase purchases/conduct unlimited 10-Year fixed rate

purchases, it would send yet another dovish signal to the market. The BoJ has

made a concerted effort to increase dovish communication recently.