VIEW: Barclays suggest that "given the.........>

JGBS: VIEW: Barclays suggest that "given the impact of the latest policy

adjustments by the BoJ and the prospect of further adjustments in the future, we

believe the JGB curve is likely to bear-steepen as a trend. When considering the

scope for a correction in rates, the 10y is important as a starting point. Based

on our revised version of the BoJ's model for 10y yields (estimating 10y JGB

yields based on 10y UST yields, the BoJ's JGB purchases and inflation

expectations)20, the current theoretical value of 10y JGB yields is around 9bp,

roughly in line with prevailing market levels (Figure 8). Assuming US long-term

yields rise to around 3% and inflation expectations nudge up with an

acceleration in domestic core CPI inflation, we expect this theoretical value to

rise to around 15-20bp by year-end. In light of the above, 20y JGBs will likely

underperform when 10y yields rise. Of course, there is also a risk over the

short term that the super-long curve will bull-flatten further, as in other

global rates markets, due to US-China trade tensions and risk-off flows out of

emerging markets such as Turkey, along with a big extension at end-August."