Lead 10-year JGB futures open lower, as expected, as speculation mounts that Japan's conservative Liberal Democrats could return to power through next month's election and adopt a reflationary policy highly damaging to bonds. The December contract stands down 0.07 at 144.40 now. Analysts are closely watching how what they refer to as "Abe-trade"--a strategy named after the LDP's chief that involves selling bonds to bet on potential inflation--would affect the auction of a new 20-year JGB later in the day. "There seems to be a strong sense of caution toward a potential bear-steepening, or 'Abe trade,'" says Mizuho Securities market economist Jun Kawakami. "That could have an impact on the auction result." 10-year cash bonds open lower, with the yield up 1.5 basis points at 0.750%.
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