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

JGBS AUCTION: The Japanese Ministry of Finance (MOF) will today sell Y2.2tln of

0.10% Year bonds, a reopening of issue #134.

- The MOF last sold 5-Year paper on Dec 12, at an average yield of -0.104% at

101.03, a high yield of -0.102% at 101.02. The sale was covered 4.381x.

- While there is concern around the super long sectors after the BoJ reduced

purchases last week the 5-10 Year sector is seen as relatively safe, meaning the

BoJ trade will play an active part at the auction. Also supportive of demand is

the still subdued level of USD/JPY basis swaps, while swaps have come off lows

as we went into year end the 5-Year sector is still at -52.375bp meaning foreign

demand should be robust.

- At these levels the 5-Year sector looks cheap, yields are 2.6bp higher since

the turn of the year, while from a relative value perspective the Z-Score on the

issue at 2.21 is the most attractive across all maturities. ASW have cheapened

to -18.4bp since a low of -21.5bp in December.

- As a note 5-Year issuance is set to be reduced by Y2.4tln, a 10% drop from

FY2017. Results due at 0345GMT/1245JST.