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

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.