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EGB/Gilt: Rally Extends


BLOCK, Funded Midcurve Put Spd


Bull steeper


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(M2)‌‌ Corrective Bounce Extends


BLOCK, Midcurve Put Spd

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JGBS AUCTION: The MOF will today sell Y2.2tln of 0.10% 5-Yr notes, the 2nd
reopening of issue 132, the auction size and coupon are in line with recent
issues. At the previous auction on July 11 the auction drew an average yield of
-0.035% at 100.67, a high yield of -0.033% at 100.66 with 81.8127% of bids
allotted at high. Covered 4.849x. In the grey market the issue currently yields
-0.083%, down 0.3bp on the day. 
- The BoJ cut purchases in the 5-10 Yr zone yesterday, capitalising on the lack
of volatility to reduce purchases to below even the Y450bln level before the op
increase to control the yield spike. There were whispers that the 1-5 Yr sectors
could be cut(seen as the most volatile sectors in terms of purchase size) with
yields up almost 10bp since the 2017 low. However the recent decline from highs
above the -0.05% threshold largely dissuaded markets from this speculation. 
- Cover at the July auction was the highest since 2014, though the security is
trading at richer levels now which will likely impact demand. However as
Barclays note demand for the issue has been strong in the BoJ's SLF, suggesting
sustained dealer demand, which should support the new supply.

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