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

JGBS AUCTION: The Japanese Ministry of Finance (MOF) will today auction Y1tln of

0.60% 20-Year bonds, a reopening of issue 162 is planned. The MOF last sold

20-Year paper on October 17, the auction drew an average yield of 0.590%, a high

yield of 0.591% at 100.15 and was covered 4.054x.

- Carry and roll in the 20-Year is still the highest on the curve at 2.04 which

should support the auction, the issue has cheapened with the Z-Score at 1.47,

the most positive across the curve.

- JGB yields have fallen since the previous auction, issue 162 currently yields

0.571% in the grey market. Some of the fall is attributed to MOF suggestions of

reduced super long issuance in super long JGB's which will likely continue to

support demand.

- Bank of America note that demand from banks could be subdued at the auction.

"megabanks continued to shorten the durations of their JGB holdings. It might be

getting more difficult to purchase 20yr JGBs just for carry income on the

grounds that this maturity has low volatility."

- Result due at 0345GMT/1245JST.