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IB Prepares For Surge In Japanese Bond Volatility, Removes All Intraday Margins On Japanese Products

Tyler Durden's picture





 

On Friday morning, after the humiliating for the BOJ halt of the ¥1 quadrillion Japanese government bond market, the second largest in the entire world due to unprecedented 13-sigma volatility, we joked that as a result of the central bank's desperation, it has now made trillions in the formerly world's "safest" security trade like a penny stock.

It appears our joke was not far off the mark as a few hours ago, in advance of the Sunday reopening of the JGB, at least one broker has decided to prepare for another record vol session by completely eliminating intraday margins and thus avoid the possibility of even more limit up/down crashes as a result of margin stops being hit and starting a self-reinforcing feedback loop of even more buying or selling.

From Interactive Brokers:


Of course, this includes not only JGBs, but equities and FX too. But the message is loud and clear.

Remember when everyone looked with apprehension at EURUSD levels as Sunday afternoon trading reopened? That was so 2012. Now it is all about the opening levels of the 10 Year JGB. And once the GETCO "momentum ignition" algos sniff out the persistent volatility that is now a staple of the Japanese bond market, expect 100% intraday swings in the second biggest sovereign bond market to become the norm. Which may be just what the BOJ wants: after all why bother with the pesky market at all - just halt it indefinitely and have a group of failed economists set the daily price fixing themselves. What can possibly go wrong?

 


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Sat, 04/06/2013 - 13:09 | Link to Comment Motorhead
Motorhead's picture

Volatility, bitchez!

Sat, 04/06/2013 - 13:51 | Link to Comment tallen
tallen's picture

Margin Calls, bitchez.

Sat, 04/06/2013 - 16:02 | Link to Comment disabledvet
disabledvet's picture

That would suck. "but that's the whole bank" moment comes to mind.

Sat, 04/06/2013 - 22:32 | Link to Comment strannick
strannick's picture

Hyperinflationary collapse/carry trade unwind/ fund redemptions, bitchez

Sun, 04/07/2013 - 06:08 | Link to Comment Middle_Finger_Market
Middle_Finger_Market's picture

America = Japan, bitchez! 

Sat, 04/06/2013 - 13:08 | Link to Comment FieldingMellish
FieldingMellish's picture

The ultimate in central planning has been achieved now that even the market price has been dictated. Well done Krugman et al...

Sat, 04/06/2013 - 13:12 | Link to Comment EscapeKey
EscapeKey's picture

Surely this could be solved by the boj expanding their asset purchasing program /sarc

Sat, 04/06/2013 - 13:25 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Japan may quite surprise the ZeroHedge crowd and make their programme work, actually

And we should give Japan courage for their brave gamble

There are reasonable - quite reasonable - arguments that Japan's current policies may well succeed, as similar policies succeeded in the early 1930s

The large-scale new Japanese QE is of a very qualitatively different kind than the Bernanke version, which only channels trillions to Wall Street ... the Japanese are, by contrast, trying to lift all the boats in the harbour, and they could well do it.

And besides, it is a roll of the dice in a situation where the Japanese have little to lose by trying

The reasons why Abenomics might work, and why Japan should absolutely continue to try to do what it is doing, are nicely covered by Ambrose Evans-Pritchard this weekend:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100023922/ab...

Sat, 04/06/2013 - 13:35 | Link to Comment Cycle
Cycle's picture

The difference between now and the 30's was that in the 30's there was no way to exit Fed bond purchases other than by selling them, since the money supply depended on the supply of gold. Now, any CB can promise to sterilize its interventions at some point in the future, but the market does not believe they will not monetize. It is the reason why the bond markets are not "buying" it this time.

Sat, 04/06/2013 - 13:59 | Link to Comment ebworthen
ebworthen's picture

I don't know, the "QE reduces debt" line reminds me of a drug addict I knew in college who convinced himself if he put his Biology textbook under his pillow when he slept he would absorb all the knowledge in it.

Sat, 04/06/2013 - 20:14 | Link to Comment Mine Is Bigger
Mine Is Bigger's picture

I am really curious.  How do you think what the BOJ has launched can "lift all the boats"?

Sat, 04/06/2013 - 14:25 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Are you capable, abstractly even, of writing anything other than 1) paeans to that insufferable imbecile Evans-Pritchard - who needs to disappear off the face of the earth - and 2) moronic platitudes based on the ingestion of pure, uncut hopium?

Sat, 04/06/2013 - 14:33 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Brussels dude,

Japan may quite surprise the ZeroHedge crowd and make their programme work

I guess this will be acceptable when inflation blows through the roof. When meals start costing entire week's worth of wages. Hey, my 800 sq ft apartment costs 10 meals per month in the ghetto. Yeah.......  

Sat, 04/06/2013 - 16:04 | Link to Comment disabledvet
disabledvet's picture

"meanwhile in Europe....

Sat, 04/06/2013 - 16:24 | Link to Comment Debugas
Debugas's picture

a country that does not have to rely on imports of raw materials can do that type of stimulus but japan is not that type of a country

Sat, 04/06/2013 - 17:58 | Link to Comment exartizo
exartizo's picture

Krugman is that you? You Sneaky Rabid Keynsian Bastard.

Sat, 04/06/2013 - 22:19 | Link to Comment malek
malek's picture

Wow, AEP has gone full retard.

The GPIF will be a net buyer until the 2040s.

Maybe the US government should also invite him, to convince him that the SSTF will also be a net buyer of non-marketable treasuries 'til 2040. <facepalm>

Sun, 04/07/2013 - 15:12 | Link to Comment fnordfnordfnord
fnordfnordfnord's picture

Rots of ruck!

Sat, 04/06/2013 - 13:12 | Link to Comment smlbizman
smlbizman's picture

fruck you wrahle, fruck you dolphin, fruck u ib......

Sat, 04/06/2013 - 13:11 | Link to Comment Racer
Racer's picture

Avoid it by increasing margins? Surely that will trigger massive selling/volatility by doing so?!

Sat, 04/06/2013 - 13:11 | Link to Comment machineh
machineh's picture

In other words, you need cash equal to the nominal value of the JGB contract to add to positions.

This is just one step short of dictating that JGB trades can be made only to close positions, not to open new ones.

Ever since ZH cast an unwelcome spotlight on Jefferies and IB during the MF Global meltdown, IB has been extremely conservative.

Sat, 04/06/2013 - 13:35 | Link to Comment Zero Debt
Zero Debt's picture

Can't fault a broker for being boring.

Sat, 04/06/2013 - 22:42 | Link to Comment MythicalFish
MythicalFish's picture

No its not, all it does is not allow you to punt intra-day for half margin as before. It is a very small move by IB, and only for new positions.

Sat, 04/06/2013 - 13:22 | Link to Comment Dead Canary
Dead Canary's picture

Well, goodby everyone. I'm setting the timer and going into my bunker now. When I emerge in one year, I hope the landscape won't be too scorched. With any luck all the bodies will have decomposed so the smell won't be to bad. Later dudes.

(For all you ladies who survive, I will have soap and toilet paper. Please form an orderly line)

Sat, 04/06/2013 - 13:37 | Link to Comment nonclaim
nonclaim's picture

Hope your bunker is not in a coal mine.

Sat, 04/06/2013 - 16:06 | Link to Comment disabledvet
disabledvet's picture

Oh look! Micro nukes from North Korea!

Sat, 04/06/2013 - 18:33 | Link to Comment DeadFred
DeadFred's picture

You think it will take a full year for the meltdown and decomp? What a hopeless optimist.

Sat, 04/06/2013 - 13:43 | Link to Comment Yen Cross
Yen Cross's picture

      The markets are completely irrational right now. I wouldn't be surprised to see a massive [long vs yen] squeeze next week. The market is obscenely short yen.

      Kuroda and Abe don't want the yen used like the Swiss Franc. They know that a squeeze will come.  Japan is an export(surplus) economy and has an ageing (saver mentality). I think we get a decent retrace next week, then another blast higher, followed by  another bigger consolidation eventually settling into a range trade.

Sat, 04/06/2013 - 15:05 | Link to Comment Petrus Romanus
Petrus Romanus's picture

Question: How can the "markets" be irrational when they appear to be computer generated illusions? At least in the US and EU. Just asking.

Sat, 04/06/2013 - 15:23 | Link to Comment Yen Cross
Yen Cross's picture

    Who provides the input/code for algorithms?  Humans<

Sun, 04/07/2013 - 12:41 | Link to Comment nicoacademia
nicoacademia's picture

its irrational to those losing money! HAHAHAHAHA

Sat, 04/06/2013 - 15:35 | Link to Comment FinalCollapse
FinalCollapse's picture

Yen - Japan is no longer surplus economy. They run trade deficits since 2011 and current account deficits since 2012 and things are getting progressively worse. Their export engine crashed and will not restart - no longer competitive.

On the trade front they are sandwiched between China and Korea and on the demographic front...you know it is complete mess. They cannot procreate or inflate - to quote Jim Grant.

Sat, 04/06/2013 - 23:40 | Link to Comment Alexandre Stavisky
Alexandre Stavisky's picture

10 finance ministers in 6 years should tell you enough.  Much commentary has been made about the special Japanese culture.  One feature is they do not take service to their country lightly.  The other is that having occupied a prestigious appointment, if one were to commit suicide, it is far, far more than just the selfish act as interpreted in the west.  It is the penultimate signal of unremediable frustration and taking the only honourable out.  Two ministers terminated themselves.  Game Over for them, Game Over for their protected provinces.

When shame, dishonour, or sure defeat seem imminent, death alone preserves honour.

What they knew then, we will only know as it unfolds.  But definitely, it will be what they would consider unbearable.

Sun, 04/07/2013 - 12:45 | Link to Comment nicoacademia
nicoacademia's picture

those hondas sanyos sonys hitachis daikins are gonna be 50% off!

one up china's face.

Sat, 04/06/2013 - 13:44 | Link to Comment e m m
e m m's picture

No more margin? But what's so bad with a little moar synthetic momentum?

Sat, 04/06/2013 - 14:25 | Link to Comment jeebus
jeebus's picture

Is Kyle Bass celebrating right now?

Sat, 04/06/2013 - 14:46 | Link to Comment kushmere
kushmere's picture

Monday is going to be a good fucking day for Bitcoin. Unfortunately, I still think they are a bit overpriced at $140. Monday will tell though.

Http://bestbitcoinsites.wordpress.com

Sun, 04/07/2013 - 12:46 | Link to Comment nicoacademia
nicoacademia's picture

i hope you're the one selling that $600 bitcoin mining machine. and not getting in that shit.

Sat, 04/06/2013 - 14:46 | Link to Comment kushmere
kushmere's picture

<------ Bitcoin deserves a chance.

<------ FUCK THAT SHIT

Sat, 04/06/2013 - 15:00 | Link to Comment Yen Cross
Sun, 04/07/2013 - 02:14 | Link to Comment TheSilverJournal
TheSilverJournal's picture

Nobody should judge what deserves a chance in the economy. Anything that's not fraud deserves a chance and the market should be the judge. All types of currency should be legal.

If the question is, "Is Bitcoin a good currency?" I would say it's pretty good but it has some flaws like why did the price crash to $0 awhile ago (clearly shows there's a problem with system), and is it really decentralized and is it really impossible for anyone to steal from it or create more or crash it? Also, is it really untraceable? In addition, a better digital currency may pop up and render worthless.

If the question is, "Is Bitcoin a good investment?" I would say it's an ok spec play. On one hand, the entire thing could just crash to worthlessness, which it likely eventually will (ould be decades from now). But on the other hand, in the short term, the Bitcoin market is very tiny relative to the amount of wealth tied up in fiat, bonds, and credit supported assets - all of which will fall hard in its face when the ponzi collapses causing the greatest transfer of wealth ever as the world population rushes to keep from losing their entire life's savings. During this rush, Bitcoin could perform crazy well.

Sat, 04/06/2013 - 14:49 | Link to Comment DutchR
DutchR's picture

Had to give you a negative.

chance or fuck

 

Sat, 04/06/2013 - 15:01 | Link to Comment electricgorilla
electricgorilla's picture

Anyone have any predicitions on where the Japanese Yen heads from here. I think it continues to fall more next week. The BOJ sure has some balls of steel to embark on such a massive QE program. Will be interesting to see how this all plays out.

Sat, 04/06/2013 - 15:27 | Link to Comment RockyRacoon
RockyRacoon's picture

Predictions?  Are we into crystal ball territory now?  Frankly, I couldn't care less what the Yen does -- or the dollar for that matter.   Got gold/silver?

Sat, 04/06/2013 - 15:37 | Link to Comment NoClueSneaker
NoClueSneaker's picture

Same thought - for monday prediction about yen, methinks acids might be a real thing ...

 

Sat, 04/06/2013 - 16:19 | Link to Comment Yen Cross
Yen Cross's picture

  01:00       NOK             Norway Manufacturing Production (MoM)                 0.30%    
01:30       EUR             Sentix Investor Confidence           -13.1     -10.6      
03:00       EUR             German Industrial Production (MoM)           0.3%            
07:00       USD             CB Employment Trends Index                 111.10      
15:00       NZD             NZIER Business Confidence                 20      
16:01       GBP             BRC Retail Sales Monitor (YoY)           2.5%     2.7%      
16:01       GBP             RICS House Price Balance           -5%     -6%      
18:30       AUD             NAB Business Confidence                 1      
18:30       CNY             Chinese CPI (MoM)           -0.6%     1.1%      
18:30       CNY*             Chinese CPI (YoY)           2.4%     3.2%      
18:30       CNY *            Chinese PPI (YoY)           -1.8%     -1.6%      
22:45       CHF             Unemployment Rate           3.1%     3.1%      
23:00       EUR             German Trade Balance           15.0B     15.7B      
23:45       EUR             French Government Budget Balance                 -12.8B      
23:45       EUR             French Trade Balance           -5.0B     -5.9B      

    Tuesday, April 9th?       Notice the China Macro*

Mon, 04/08/2013 - 00:05 | Link to Comment Trampy
Trampy's picture

My prediction is JPY futures will test 0.010000 and FX will test 100.   If they break those levels, it's gonna be a helluva all-nighter.

Sat, 04/06/2013 - 15:56 | Link to Comment electricgorilla
electricgorilla's picture

"Frankly, I couldn't care less what the Yen does -- or the dollar for that matter.   Got gold/silver?"

To say you could care less about what the Japanese Yen or the U.S. Dollar does is rather destructive. You have to understand what the dollar is doing to understand Gold/Silver right? What is wrong with predictions? Nothing is wrong with thinking of future outcomes.

Sun, 04/07/2013 - 02:18 | Link to Comment TheSilverJournal
TheSilverJournal's picture

I think his point is that the end game of fiat returning to its intrinsic value is near. To spend countless hours following the path to worthless may not be the best use of time when the end result is already known.

Sat, 04/06/2013 - 17:11 | Link to Comment Herdee
Herdee's picture

I love high volatility$$$eom

Sat, 04/06/2013 - 19:20 | Link to Comment BigInJapan
BigInJapan's picture

Countdown to another fine display of Japanese lack of self-responsibility in 5. . . 4. . . 3. . .

BOJ /Abe: "This is the fault of international traders."

Sat, 04/06/2013 - 22:26 | Link to Comment Paracelsus
Paracelsus's picture

Prediction?    I see a whole bunch of very unhappy geriatric pensioners in Japan.

They intend to hyperinflate the currency. Shoot a horse four or five times to weaken it,but hope you don't kill it. THIS IS THEIR POLICY?

Reward Fraud,zombify the Banks,and then say "We didn't have any other choice!".

I thought the Japanese had lotsa brains and culture.

If they lost the fight keeping VX down,how long before the USA loses the fight with Au? 

Sun, 04/07/2013 - 10:56 | Link to Comment Treason Season
Treason Season's picture

Nipponese = Kabal patsies

Sun, 04/07/2013 - 01:52 | Link to Comment dunce
dunce's picture

Eliminating intraday margins, finally a market manipulation that i can respect.

Sun, 04/07/2013 - 12:45 | Link to Comment nicoacademia
nicoacademia's picture

just ask the Hunt Brothers

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