PREVIEW: The Japanese Ministry of......>

JGBS AUCTION: PREVIEW: The Japanese Ministry of Finance (MOF) will today sell

Y600bn of JGBs with 5-15.5 Years until maturity in a liquidity enhancement

auction. JB#1-17, #72-151 & #335-354 will be on offer. The previous enhanced

liquidity auction covering these maturities was held on Jun 11. The auction saw

Y600bn offered and was covered 3.057x at an average spread of +0.010%, and a

high spread of +0.013% with 12.2659% of the bids allotted at the high spread.

- 10-Year JB#345 accounted for Y138.8bn of last month's offering, with

JB#344-346 accounting for ~Y212bn in total.

- The 7-Year sector of the curve looks a little rich in ASW terms, so may

discourage investors from the zone, although the flatness of the 5-10 Year

sector of the curve may attract participants to the shorter dated offerings.

There is nothing to choose from re: carry and rolldown in benchmark 10s & 20s,

so that may deter participants from buying some of the longer dated issues on

offer in a simple buy and hold strategy. The recent reduction in the purchase

size of the BoJ's 10-25 Year Rinban operations may further this dynamic.