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

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

of 0.80% 30-Year bonds, the first auction of issue #57, the MOF will also sell

Y4.42tln in 3-Month bills today. The MOF last sold 30-Year debt on November 9,

the auction drew an average yield of 0.789% at 100.26, a high yield of 0.80% at

100.00, covered 3.426x. In the grey market the on the run 30-Year yields 0.843%.

- The MOF sold 10-Year debt to weak demand on Tuesday which catalysed a sell off

in the sector. The 30-Year today is expected to be taken down more smoothly, at

these yields levels the 30-Year sector is fairly attractive especially

considering expected year end inflow and large redemptions (Y16.7tln) in

December. The auction will also be supported by the distribution of 10+ year BoJ

purchases, the majority of the operations fall in the second half of December.

- The auction does face headwinds though, the BoJ have already reduced purchases

in the long end and there is rampant speculation that a YCC policy change is on

the cards to steepen the curve. The issue is also rich on the curve at -3.4bp on

an ASW basis from around -.18bp at the last auction with a negative carry and

roll of -1.29. Results due at 0345GMT/1245JST