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The Real Japan "Panic" Indicator May Hit At 1pmET
The Japanese government bond market has been cataclysmicly volatile in the last few days since the BoJ shifted from words to action - with an average daily range 8-times normal. But, as a rather famous rates desk trader recently noted, if there is a real "Japan Panic" trade, it will make itself evident at 1pm ET today. His reasoning is impeccable. The BoJ has embarked on a program where it will be buying 'more' long-maturity bonds than the government issues (at around $80bn equivalent per month, ad infinitum, in a nation, that we pointed out here, has a GDP that is 40% of the US.) This surge in liquidity, which as is well known across the G-7 is completely fungible (within and across all bank balance sheets), has to leak somewhere, and the 30Y US Treasury bond is now the highest-yielding 'safe asset'. However, the Fed is monetizing vast amounts of US Treasuries indirectly and so the only way for a large Japanese investor to buy enough to make a difference is at the auctions. And so, if the 30Y auction today prints with a large "negative tail" - inside of the WI - then it would go a long way to confirm the "Japan Panic" trade is on.
The 30Y Treasury has average a 0.74bps positive tail on average, we will be looking for a negative tail today...
For reference, 30Y Bid-to-Cover has been relatively stable since the crisis began...
as Japanese bond volatility explodes...last night was the biggest range in 5Y JGBs in almost 5 years
Charts: Bloomberg
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Why do we have to wait till 1 PM to panic again?
Why wait?! We can just start panicking now and get it all out of the way.
It's the New Normal friend, you can panic any damn time you want!
Time is relative. Lunchtime doubly so.
The Hitchhiker's Guide to the Galaxy
I am gonna front run all of you bitches..HAHAHA
A wise ZHer once said:
1.) Don't panic
2.) If you panic, be the first to panic.
Martians do not panic
We could see gold prices EXPLODE higher to $1,569.00!
You a bettin' man, DS?
Panic: ongoing since 2008....
Whaddup Fix!
IridiumRebel, good to see you, all is well, just waiting for the end of the world as we know it, but what else is new?
Keep stacking.
I am sir! Me and the wife leave CT in 3 months for Ohio. Vote with your feet!
We prefer a good panic just before bedtime....
Excuse me, but can we stop with the bullshit.
Computers don't panic. HFT doesn't panic. It just reacts to its opponent.
Just forget this trading stuff. That's all in the past. This world is new, and there are no humans involved.
Governments will collectively intervene in ANY financial threat to keeping the wheels turning. So stop thinking in terms of trading and financial this or that.
Only things government cannot control can take the system down. That would be oil.
Well, I think its possible that governments still panic.
When they see the pitch-forks and torches....
That's when the magical Unicorn's shit Bitcoins and save the day... I guess I picked the wrong day to stop drinking.
Who said anything about panicing? This is still just the culture shock!
Fuck this world, I want off.
No one get's outta here alive!
They grind your bones to make their bread.
<Gluten free I might add, a definite benefit.>
When I'm dead and gone, they can do with my bones, whatever pleases them most.
Please don't take fractional reserve banking with you. We don't need to spread it to other worlds.
Thanks in advance, Kent
Martian Air booked solid... nobody else getting off this rock we call earth.
Anybody seen my kevlar under suit laying anywhere??
Is this bullish?
Bullish for beanie babies... i mean bitcoins
Bullish in the respect that US public debt will be able to be continually piled on at super low interest rates (for now) as the fiat currencies of Japan and then Europe collapse, making the dollar the last "safe" fiat currency standing.
can someone please explain what a tail means? negative tail? WI (when issued)? I read all of this stuff on ZH and understand 90%, this is the 10%
Passing the Series 7 might be a step in the right direction.
<Then again.......it might not.>
I passed Series 2 earlier today, it left my toilet messy and I still don't understand how this affects JPY.
Any good books?
A_Dog If yields on the T30 go down significantly then it would signal a huge capital outflow from Japan. That would/should be negative for the yen. It could cause the BoJ to lose control, and the yen to weaken much MOAR.
That is the theory. Then again, coordinated global currency debasement is essentially unprecedented. So it seems we are writing the book as we go.
<I hear Krugman will be doing the pornographic fiat illustrations for the limited edition hard cover.>
In theory. +1
Thank you. If you were standing infront of a mirror holding 11 roses, you would be looking at the 12 most beautiful things in the world
That could be the gayest thing I've ever read on ZH.
I'm just warming up
Special High-Intensity Trading is a dirty business.
I don't think the 7 will help him with that terminology.
LOL. It seems I forgot the /sarc tag again. :)
All the 7 gets you ready for is to sell sell sell sell to the Muppet sheep sheep sheep.
Sorry, most of us have no interest in being certified stock pickers, gamblers, liars and street hustlers. I'm happy to be an amateur douchebag!
IIRC - Tail is the difference between the WI and the highest yield on the auction. Basically, a positive tail means less overall demand whereas a negative tail means higher demand.
Thank you Ness, simple and to the point. CD, I did pass the 7 10 years ago, but don't sell bonds. Hope you have a better day.
Sorry. I was just being a little too snarky this morning. And I forgot the /sarc tag.
In reality the 7 gets you ready for nothing but the very basics that really don't apply anymore....if they ever did.
I'm glad he asked, as I'm in the same boat.
Thanks for taking a stab at explaining it to us as well, but I thought "When Issued" was the price at auction... I guess not.
So the equation would be:
"When Issued" price
- Price at Auction
= Tail ?
1. In a bond auction, the difference between the lowest bid and the average bid in the auction.
Thanks, TPTB_r_TBTF.
It looks like that financial site has a somewhat different definition than the mortgage guy that nbsharma linked to gave, though.
But I guess the bottom line either way is that a negative tail would have pointed to a run by the Japanese big investors to U.S. treasuries. It looks like there was no panic move yet, so I guess we're still good to go, eh?
being a contrarian hasn't paid off too well lately
I read this piece last night and it is a good reminder for anyone that trades in the Asian currency and equity markets. I shows just how fast things can deteriorate. As yen slides, 1998 stands as warning to markets - Michael Casey's FX Horizons - MarketWatch
Look at Japan, it's the future of the US. Bernanke and the Federal reserve have been advising Japan for years.
Japan's desperation.
Looks like 1pm is the "all in" buy program time for the SP500
Another stock market crash awaits courtesy of the central bankers meddling. Time to dig out Hayek's book again.
Just learnt something.
Basically, a negative tail means bidders agreed to a yield lower than high yield (stop through).
--
http://www.mortgagenewsdaily.com/mortgage_rates/blog/242898.aspx
Why is HIGH YIELD important?
Shortly after the auction, anyone can view the results on www.treasurydirect.gov. (Today's for example: http://www.treasurydirect.gov/instit/annceresult/press/preanre/2012/R_20...) Although a "low yield" and "median yield" are displayed, it's the "high yield" that is the important one. The word "stop" shares the correlation with the "high yield" because Treasury auctions are a Dutch Auction process where bidders submit the minimum yield they're willing to accept and the auction moves higher and higher in yield until all the money requested by Treasury has been committed by investors. Thus the auction "stops at the high yield."
BUT! There's another tricky connotation to be aware of with the word "stop." Generally, when the high yield is lower than the when-issued (or "WI" yield), the auction is referred to as having "stopped through" or "traded through." In this case "stop" carries an implicitly positive connotation. The The opposite of this sort of "stop through" is a "tail." In other words, if the yield stops at a HIGHER level than when-issued, the auction is said to have "tailed." Bottom line, auctions either "stop through" or "tail," unless they hit the when-issued yield (measured just before results are released) exactly in which case, most refer to the auction as being "on the screws." Note that the result can also be referred to in NOUN form as such: "there was a tail" or "there was a stop-through." Some refer to a stop-through as a negative tail as well.
Thanks much for that detailed explanation, nbsharma, but I'm still unclear on one thing.
How and when exactly is the "When Issued" price determined? Could it be manipulated by the Fed via their puppets?
It seems that they could pretty easily manipulate the Bid to Cover ratio by asking their dealers to put up a lot of bids at rates higher than they know they will have to ever cover making the BTC ratio look bigger than it would without such shenanigans.
So what's the trade here for us less sofisticated traders? Short jpyusd?
It depends on how sofisticated you really are. You may look at gold, or Cyprus Pounds, depending on your level of risk.
sofisticated reply!
The 30y usa treasury is the best investment on Earth right now.
How can that be so when the usa treasury is broke?
That and Facebook coins.
That and Facebook coins and iTunes credits.
That and Facebook coins and iTunes credits and tulip bulbs...
Maybe it will cause a 12 hour cooling off period. They make some piss-poor exchanges in Japan.
Looks like I picked the wrong day to stop sniffing glue.
I'm quite sure a local dealer should be able to offer you viable alternatives ;-)
the island is puking fukushima radiation and there is some other panic trade?
It's invisible, so it doesn't exist. The whole fucking population could die of radiation poisoning and it would be explained as 'within normal statistical variation'.
Bearish of gold.
Japan,
Hyperinflation is in your future. massively print into it, thank you.
Warming up is Bubble Benny and the Fed.
I'm following a very simple thesis. Any Japanese asset will depreciate in real terms even though it may appreciate in nominal terms.
The BOJ cannot print wealth, just as no Central Bank can. They can only print representations of wealth. Short the entire island.
Don't ruin the party for everybody by barging in and talking sense.
ATM - WTF - Somebody junked you? Does the troll think the BOJ can print wealth?
"Short the entire island" ?
Isn't that what Abe/Kuroda are doing ?????
How can you do that trade if you're not a central bank?
p.s. many small-time FX players avoid USD/JPY because very sharp moves come out of nowhere with no warning.
I'm sorry but despite the totally logical argument, all the facts, the complete rationality of the thesis...this is extremely bullish....I don't know how but I know it is. lol
Can this panic not wait until after lunch?
See my comment above ...
You know…if people want to follow their parents into poverty and their grandparents into insanity, because they are focused on the past instead of the future, that is their business. There is nothing you can do about it. Which is more effective, trying to rehabilitate grown adults willfully subjecting themselves to empire ‘de-synchronization,’ anxiety, and addiction, or raising kids to respect themselves, others and nature? Wow, how rocket-sciencey! If you are going to play in the Keynesian casino, bet on the house, and expect it to collapse. The economic slaves are brought in, slaughtered and replaced. The math is not that difficult.
So, all the corporate morons are over in China again, trading increased access to a shrinking slave labor market in return for their hopelessly impaired digital dollar asset base at home, while the bankers print to the moon, to simulate economic viability. Yes, we are quite capable of injecting the necessary technology to support $30T in debt. Are we? Absolutely not. When you compress the resistors between the inductor and capacitor, what happens?
The majority sides with capital, every time, like clockwork. In this iteration, the digital fixed costs are sucking the entire global economy into the void between their ears. Getting into the casino is easy. Getting out is another matter all together. Try, try, try again to replace new family formation as the fundamental building block of economics, with eunuch morons in an ivory tower, screaming ever more shrill as their feminist rats jump off the ship. Let’s see, who will Clinton have to sell out? Hmmmm……
Those young people who have learned to recycle will do quite well. The majority, however, who chose to liquidate their parents’ estate, will not fare so well. You cannot choose your parents and you cannot choose your children, but you can choose your spouse. Borders are designed by legacy family banks, capital, to contain new family formation, labor, to the end of capital. Step out of the way and they implode, due to the positive feedback. Has there ever been a better time to be a banker? The upper middle class can have its cake and eat it too.
These idiots in ‘frisco are sitting on top of the world, a bomb waiting to go off…funny, when they see me in line with the homeless, their brains start melting. Rome saved itself by becoming the Holy Roman Empire. Keep waiting for Jesus. An empire runs on the rails of currency and technology. What happens when you unfasten the ties?
Only the middle class looks at national borders like they are real. Japanese monetary expansion is just Fed monetary expansion. By the way, did you happen to catch that piece in the WSJ encouraging parents to employ Machiavelli as the model for raising their children?
Mmmm...whale tail.
Costs $14.95 to watch from a hotel room...but it's here for free.
Thar she blows!
I thought ctrl-P was for printing...you mean it is for PANIC?
If that's is indeed the case, then the TLT 121 calls that expire tomorrow should be a homerun. I took a shot. I'll risk some of the money that I made on a put trade...
If China and the BRICS want to kill off Japan and the US offer a viable currency.
Get people to rush out of US dollars and yen into this viable currency.
One way for China to kill the US dollar and yen.
Maybe China will wait until the US debt goes to $25 trillion.
China is patient, very, very patient. It's in their culture.
What time is the Pre-Release of Treasury Auction Results?
Safe ??? So they say, until interest rates go up.
stock market top watchers - keep in mind today is 4-11
First Japan.......then EZ.....then UK......then here.
It won't be a collapse, but enough of a downturn to gut economies and social safety nets (and benefits hedgies and TBTF Banks who short on this news).
Speaking of panic, my instincts tell me that the WH is on the verge of a mild panic itself....to be continued....
Speaking of panic, my instincts tell me that the WH is on the verge of a mild panic itself....to be continued....
You can only eat your own SHIT so long before you PUKE........
So whats the update? Its past 1pm est.
It is past 1 EST. Did something happen? Should I panic? I need to know so I can take my nap. Panic always makes me sleepy.
I set my panic alarm to wake me up from my nap at 10:00 PDT. Did I miss anything?
I imagine that once again the powers that be have managed to steady the wobbly table on which this house of cards is built.
If Moar is good much Moar is better....no?
Been following these dudes for a while. Hit the nail on the head with a short FXY timing and give away lots of free shit including some great ways to play the whole yen game in free report
http://capitalistexploits.at/free-stuff/
The sad truth is that you panic because the tide suddenly goes out and all you see is the sea floor. By the time you think you realize what is happening, the 4-story tsunami has already swept you out to sea. The fact that we're even talking about panic means it's too late.