Remember it was the BOJ that stepped in October of 2014 at 1970, and again in October of 2015 at 1970 again. The Japanese bought Yellen a year of time, and gave her a market of 2070 to hike rates. Now that the market has fallen back to the August low, it is the BOJ who has turned their monetary policy to negative rates. What does this tell the market? That after attempting to pump it twice above 1970, with the market at 1870 they have switched to negative rates. Sign of desperation? So far the market is not buying it.
Because so much is riding on what so few decide,once the faith in the Central Banks fail, the chances of us getting out of this diminish every second...
2Y yields crashed 10bps overnight - the biggest plunge in yields since September's FOMC fold on rate-hikes. The rest of the Treasury bond complex also saw yields crash with 10Y flash-crashing 20bps - amid collapsing liquidity - at its deepest. Then - as if by magic - a sudden crazed Yen seller appeared and lifted all risk boats (and bond yields) "off the lows." One wonders how long this 'intervention' will last...
Just like two days ago, when for the first time since 2011 the BOJ intervened directly in the USDJPY market, moments ago Kuroda's trading desk once again decided to sell a boatload of Yen, with the key carry pair trading at 111.25 and threatening to take out the 110 support, in the process sending the USDJPY higher by 175 pips in a matter of seconds to just above 113.
Hong Kong traders are back from vacation, and with few options on the table, they are buying the one asset that provides the best cover to central banks losing faith, demonstrated most vividly by the total failure of the BOJ, and as a result just as Yen soars above 113, gold has taken out the numerous $1,200 stops and is currently surging to levels not seen in almost a year.
"We believe the epicenter of the problem is the Chinese banking system and its coming losses. Once analysts, politicians, and investors alike realize the sheer size of the impending losses and how they compare to the current levels of reserves, all focus will swing to the banking system."
"There is excessive debt everywhere and negative interest rates are dangerous... My number one fear? That’s the same as asking me where it will start. When you view the economy as a complex, adaptive system, like many other systems, one of the clear findings from the literature is that the trigger doesn’t matter; it’s the system that’s unstable. And I think our system is unstable... Central Bank models are just wrong"
While algos patiently await the only thing that matters for US stocks today which is Janet Yellen's testimony before Congress. expected to be released at 8:30 am (and previewed here), the rest of the world this morning is a hot mess of schizophrenic highs and lows.
Another night, another utter bloodbath in AsiaPac. Japanese markets are plunging (NKY down 600 from US session close and NKY is down 2200 points from post-NIRP highs) along with USDJPY as Kuroda readies himself to face parliament (and Abe says he "trusts Governor Kuroda.") Once again banks leading the pain. Australia is also in trouble, after admissions of cooked data sent stocks lower pushing the ASX 200 into bear market territory.
Just 40 full days into 2016, not only has Goldman been closed out on its Top Trade for 2016, namely being long the USD vs both the Yen and the Euro, but virtually all of its other trades: according to a just released update, Goldman has just been stopped out - with a loss - on 5 of its 6 top trades for 2016.
With China offline for the rest of the week, global markets have found a new Asian bogeyman in the face of Japan which as reported last night saw its markets crash, and the Yen soar, showing that less than 2 weeks after the BOJ unveiled NIRP, yet another central bank has lost control.
The total and utter failure of The BoJ continues to accelerate...