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Bearish Threat Remains, Despite Intraday Rally


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BRL Hedging Volumes Surge Post-BCB


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JGBS: The JGB curve was subjected to some bear steepening on Friday, as
super-long paper underperformed, with 40-Year yields finishing the session
~2.0bp higher. Longer dated swap rates tracked yields higher.
- A strong morning session for Japanese equities on the back of Wall St.'s
positive lead & a soft JPY (resulting in fresh YTD highs for USD/JPY) likely
explained at least part of the move, with JGB futures breaching Thursday's low.
- Stepping back, the softness in JGBs could have come as a result of traders
unwinding positions ahead of the release of the BOJ's JGB purchase plan for
October. The release of the plan, after market on Friday, saw the BOJ trim the
upper and lower bound of the size of its 25+Year purchases (note the BOJ had
already reached the prev. lower bound). Elsewhere it left the number of
purchases and sizes unch. vs. September.
- Focus turns to today's BOJ Tankan survey, as well as the Rinban operations
scheduled for the week ahead & tomorrow's 10-Year JGB auction.
MNI London Bureau | +44 0203-865-3809 |