### The BoJ will today conduct purchase ops....>

JGBS: ### The BoJ will today conduct purchase ops in the 5-10, 10-25 & 25+ Yr

JGB's. The focus will be on the 5-10 Yr zone. The bank increased purchases to by

Y50bln to Y500bln on July 7 in response to a sharp rise in 10-Yr yields after

jumping to just short of 0.10% from 0.03% in mid-April in response to the

hawkish shift in many global central banks. The increase in purchases had the

desired effect and pushed yields lower, inducing the BoJ to reduce purchases to

Y470bln on July 24. Yields have fallen a further 3bp since which has fuelled

speculation that the BoJ could reduce ops back to Y450bln, as supply/demand

conditions are already tight, along with the BoJ's "stealth tapering"

preference. >>POV: It's unlikely the bank will cut purchases today; the

geo-political climate is far from stable which could prompt further swings in

bond markets & the Fed's hiking cycle poses problems. Though weak inflation has

reduced chances for Fed hikes in 2017, policy makers are upbeat & labour market

strength seems to be a harbinger for upward pressure on wages. MNI sources also

note that much of the upside in JGB's is due to liquidation of shorts in June as

we head to the end of summer, indicating the move may not be sustained.