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###POV BOJ: THE NEXT ADJUSTMENT TO THE.........>

JGBS
JGBS: ###POV BOJ: THE NEXT ADJUSTMENT TO THE RINBAN OPS
The BoJ's most recent adj. to its Rinban ops came in the super-long end (JGBs >
25-Years until maturity) in late Feb. This tweak came in front of FY end, with
repatriation flows expected to support the space this may not be a coincidence.
- Looking at the 5-/30-Year JGB spread we sit at YtD tights of ~85bp. The BoJ
could once again up its purchases in the shorter end of the curve (like it did
in early Feb) as the JPY has undergone a bout of strength & any subsequent
trimming in the long end runs the risk of further JPY appreciation (as those
outside of Japan who may view such a move as a step towards normalisation as
opposed to an attempt to promote a steeper yield curve). The BoJ still has
Y20bln worth of additional purchasing capacity in the 3-5 Year bucket & Y50bln
5-10 Year bucket (based on its own current outline). Although the Bank recently
confirmed that it has purchased around 75% of FY17 JGB issuance, which has
resulted in diminished cash market liquidity.
- You would exp. the adj. to come at after FY end, when repatriation flows have
subsided.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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