Thurs saw ltd reaction in futures to the.......>

JGBS: Thurs saw ltd reaction in futures to the latest 20-Year JGB auction, the

cover ratio moved higher, while the tail was very close to unch. The low price

of the auction was higher than dealers exp. 20-Year yields moved lower in the

wake of the supply, with futures sticking to a tight range during the session.

The strong auction showing may have been a result of the relative attractiveness

vs. 10- & 30-Year JGBs, and the fact that the auction represented the opening of

a new line, with the potential for FY end window dressing also a likely source

of support. This seemingly outweighed the rich asset valuation vs. swaps and

multi-month flats in the 10-/20-Year JGB spread. Yields marginally higher out to

10-Years (10-Year JGBs yielding 0.011% at the close), promoting some twist

flattening as super-long yields held lower. Futures drifted higher overnight.

- Also worth highlighting MNI understands that lowering real interest rates will

be the BoJ's main policy option if there is a need for further easing, with Bank

officials unconvinced as to the benefit of extending quantitative easing. 

- Focus today turns to Tokyo CPI & BoJ Rinban operations, which will cover 5-10

Year paper. BoJ Gov. Kuroda is set to speak in European hours Friday.