The Japanese Ministry of Finance.......>

JGBS AUCTION: The Japanese Ministry of Finance (MOF) will today sell Y800bln

0.8% 30-Year bonds today, issue #56, the first sale of this new issue.

- The last 30-Year sale, issue #55, drew an average yield of 0.876%, a high

yield of 0.880% with 12.846% allotted at high yield, covered 3.901x (the highest

in 18 months). North Korean tensions have seen yields decline, with bull twist

flattening evident in the super long sector. Issue #55 currently yields 0.812%,

near the bottom of its range.

- Expectations for the auction are mixed, one MNI source notes that the market

is reluctant to go short on JGB's while there is a still a broad risk off mood

and simmering tensions, adding that at these levels any rallies are also likely

to peter out.

- Demand from Life Insurers (typically the biggest buyers of super long

maturities) is low at these yield levels, a trend that has been evident in

FY2017. However it is HY end on Sept 31 which could see elevated demand at the

auction, especially with Y19.3tln of redemptions in September. Moreover the

recent trend of search for duration shows no sign of ending.