GOLD: Gold on Track For Best Weekly Return in a Month

• China bond futures have done very little today following a second consecutive day of modest liquidity provision during the morning's open market operations.  
• The 10-Yr future is down -0.01 at 108.18 as it remains near to the 100-day EMA
• The 2-YR future is down -0.02 at 102.36 to move back below the 20-day EMA of 102.37
• The bond market continues to grind lower in yield with the CGB 10-Yr back at near term lows of 1.83%.  It has traded in a tight range of 1.80% - 1.90% for some months, looking for a catalyst to break out.  Equity strength and significant regional and central government bond issuance has not put upward pressure on yields despite the PBOC purchase program remaining on hold.  
• Next week's GDP may shed light on the next steps for policy, particularly should forecasts prove correct with a moderation in 3Q from 2Q 

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The Japanese Ministry of Finance (MOF) sells Y600.3bn 20-Year JGBs:

• Average Yield: 2.674% (prev. 2.654%)
• Average Price: 100.33 (prev. 98.00)
• High Yield: 2.684% (prev. 2.662%)
• Low price: 100.20 (prev. 97.90)
• % Allotted At High Yield: 9.6410% (prev. 98.6020%)
• Bid/Cover: 3.56 (prev. 3.9974x)

JGB futures are little changed at 136.31, -.02 versus settlement levels as markets await the 20yr JGB auction result, due in around 30mins. The last 20yr auction, back on Sep 17 went reasonably well with a bid to cover ratio of 3.997 (versus the prior 3.085 outcome). Since the start of Oct, the 10yr and 30yr auction results haven't disappointed the market from a demand standpoint. 

• The 20yr bond yield, like other parts of the back end of the curve, spiked after Takaichi was voted as the new LDP leader. However, from highs of 2.75% we have since stabilized, last around 2.70%.
• Political uncertainty continues around who will be the new PM, with headlines crossing a short while ago that the parliamentary committee has failed to agree to hold the new PM election on Oct 21 (which was speculated on yesterday).
• Still the upshot of there is unlikely to be strong fresh fiscal stimulus (and thereby JGB issuance in the near term). Via BBG: "The 20-year auction is expected to go smoothly, supported by the high yield level and the bond’s relative cheapness, he says (Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management Co.)".
• BBG noted: "*JAPAN 20Y GOVT BOND AUCTION MAY HAVE 100.20 LOWEST PRICE:POLL" - BBG".