Trade war matters underscored JGB futures......>

JGBS: Trade war matters underscored JGB futures overnight allowing them to

extend to fresh all time highs, after the curve was subjected to bull flattening

on Monday.

- 10-Year JGB yields hover just above the bottom end of the trading band

permitted by the BoJ, with the Bank finding itself somewhat hamstrung re:

MonPol. It could cut purchases, but risks JPY appreciation if it choses to do

so, as foreign market participants may continue to focus on "stealth tapering"

as opposed to YCC. Conversely, it could cut its benchmark interest rate, but the

worry here is on the financial stability front, so market players may view the

move as unsustainable.

- The latest round of Japanese household spending data topped exp., with

earnings data also providing a beat (although it can hardly be deemed strong in

the bigger picture).

- 30-Year supply is due later today.