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The Real Japan "Panic" Indicator May Hit At 1pmET

Tyler Durden's picture




 

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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Thu, 04/11/2013 - 11:54 | 3436700 Mr. Fix
Mr. Fix's picture

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.

Thu, 04/11/2013 - 11:58 | 3436731 TeamDepends
TeamDepends's picture

It's the New Normal friend, you can panic any damn time you want!

Thu, 04/11/2013 - 12:05 | 3436769 Bearwagon
Bearwagon's picture

Time is relative. Lunchtime doubly so.

The Hitchhiker's Guide to the Galaxy

Thu, 04/11/2013 - 12:10 | 3436798 Divided States ...
Divided States of America's picture

I am gonna front run all of you bitches..HAHAHA

Thu, 04/11/2013 - 12:20 | 3436856 Meat Hammer
Meat Hammer's picture

A wise ZHer once said:

1.) Don't panic

2.) If you panic, be the first to panic.

Thu, 04/11/2013 - 12:26 | 3436897 Cycle
Cycle's picture

Martians do not panic

Thu, 04/11/2013 - 12:40 | 3436983 flacon
flacon's picture

We could see gold prices EXPLODE higher to $1,569.00!

Thu, 04/11/2013 - 12:24 | 3436880 TeamDepends
TeamDepends's picture

You a bettin' man, DS?

Thu, 04/11/2013 - 11:59 | 3436741 IridiumRebel
IridiumRebel's picture

Panic: ongoing since 2008....
Whaddup Fix!

Thu, 04/11/2013 - 12:11 | 3436799 Mr. Fix
Mr. Fix's picture

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.

Thu, 04/11/2013 - 13:34 | 3437228 IridiumRebel
IridiumRebel's picture

I am sir! Me and the wife leave CT in 3 months for Ohio. Vote with your feet!

Thu, 04/11/2013 - 12:14 | 3436826 TeamDepends
TeamDepends's picture

We prefer a good panic just before bedtime....

Thu, 04/11/2013 - 13:09 | 3437126 CrashisOptimistic
CrashisOptimistic's picture

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.

Thu, 04/11/2013 - 13:13 | 3437144 astoriajoe
astoriajoe's picture

Well, I think its possible that governments still panic.

Thu, 04/11/2013 - 13:31 | 3437224 TeamDepends
TeamDepends's picture

When they see the pitch-forks and torches....

Thu, 04/11/2013 - 12:19 | 3436847 spankfish
spankfish's picture

That's when the magical Unicorn's shit Bitcoins and save the day... I guess I picked the wrong day to stop drinking.

Thu, 04/11/2013 - 15:08 | 3437669 m0w0g
m0w0g's picture

Who said anything about panicing? This is still just the culture shock!

Thu, 04/11/2013 - 11:53 | 3436701 BlueStreet
BlueStreet's picture

Fuck this world, I want off. 

Thu, 04/11/2013 - 11:56 | 3436722 Bearwagon
Bearwagon's picture

No one get's outta here alive!

Thu, 04/11/2013 - 12:02 | 3436762 Cognitive Dissonance
Cognitive Dissonance's picture

They grind your bones to make their bread.

<Gluten free I might add, a definite benefit.>

Thu, 04/11/2013 - 12:07 | 3436778 Bearwagon
Bearwagon's picture

When I'm dead and gone, they can do with my bones, whatever pleases them most.

Thu, 04/11/2013 - 12:04 | 3436727 kentmills
kentmills's picture

Please don't take fractional reserve banking with you.  We don't need to spread it to other worlds.

Thanks in advance, Kent

Thu, 04/11/2013 - 12:13 | 3436819 spankfish
spankfish's picture

Martian Air booked solid... nobody else getting off this rock we call earth.

Thu, 04/11/2013 - 12:24 | 3436888 Stoploss
Stoploss's picture

Anybody seen my kevlar under suit laying anywhere??

Thu, 04/11/2013 - 11:53 | 3436706 Cassandra Syndrome
Cassandra Syndrome's picture

Is this bullish?

Thu, 04/11/2013 - 11:56 | 3436721 camaro68ss
camaro68ss's picture

Bullish for beanie babies... i mean bitcoins

Thu, 04/11/2013 - 12:01 | 3436754 Winston Smith 2009
Winston Smith 2009's picture

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.

Thu, 04/11/2013 - 11:55 | 3436720 ZippyBananaPants
ZippyBananaPants's picture

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%

Thu, 04/11/2013 - 12:01 | 3436752 Cognitive Dissonance
Cognitive Dissonance's picture

Passing the Series 7 might be a step in the right direction.

<Then again.......it might not.> 

Thu, 04/11/2013 - 12:09 | 3436765 A_Dog
A_Dog's picture

I passed Series 2 earlier today, it left my toilet messy and I still don't understand how this affects JPY.

Any good books?

Thu, 04/11/2013 - 12:21 | 3436862 Yen Cross
Yen Cross's picture

    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.

Thu, 04/11/2013 - 12:25 | 3436891 Cognitive Dissonance
Cognitive Dissonance's picture

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.>

Thu, 04/11/2013 - 12:33 | 3436949 Yen Cross
Yen Cross's picture

     In theory. +1

Thu, 04/11/2013 - 12:53 | 3437043 A_Dog
A_Dog's picture

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

Thu, 04/11/2013 - 13:01 | 3437086 Tebow
Tebow's picture

That could be the gayest thing I've ever read on ZH.

Thu, 04/11/2013 - 13:10 | 3437128 A_Dog
A_Dog's picture

I'm just warming up

Thu, 04/11/2013 - 12:25 | 3436889 Cycle
Cycle's picture

Special High-Intensity Trading is a dirty business.

Thu, 04/11/2013 - 12:09 | 3436788 Dr. Engali
Dr. Engali's picture

I don't think the 7 will help him with that terminology.

Thu, 04/11/2013 - 12:21 | 3436867 Cognitive Dissonance
Cognitive Dissonance's picture

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.

Thu, 04/11/2013 - 12:34 | 3436953 Bangin7GramRocks
Bangin7GramRocks's picture

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!

Thu, 04/11/2013 - 12:04 | 3436766 Ness.
Ness.'s picture

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.

 

 

Thu, 04/11/2013 - 12:16 | 3436838 ZippyBananaPants
ZippyBananaPants's picture

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.

Thu, 04/11/2013 - 12:26 | 3436908 Cognitive Dissonance
Cognitive Dissonance's picture

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.

Thu, 04/11/2013 - 12:58 | 3437070 JeffB
JeffB's picture

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 ?

Thu, 04/11/2013 - 14:15 | 3437428 TPTB_r_TBTF
TPTB_r_TBTF's picture
Tail

1. In a bond auction, the difference between the lowest bid and the average bid in the auction.

Thu, 04/11/2013 - 14:31 | 3437497 JeffB
JeffB's picture

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?

 

Thu, 04/11/2013 - 11:57 | 3436723 derek_vineyard
derek_vineyard's picture

being a contrarian hasn't paid off too well lately

Thu, 04/11/2013 - 11:56 | 3436724 Yen Cross
Yen Cross's picture

    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

Thu, 04/11/2013 - 12:00 | 3436732 yogibear
yogibear's picture

Look at Japan, it's the future of the US. Bernanke and the Federal reserve have been advising Japan for years.

Japan's desperation. 

Thu, 04/11/2013 - 11:59 | 3436733 WTF_247
WTF_247's picture

Looks like 1pm is the "all in" buy program time for the SP500

Thu, 04/11/2013 - 11:58 | 3436734 mdtrader
mdtrader's picture

Another stock market crash awaits courtesy of the central bankers meddling. Time to dig out Hayek's book again.

Thu, 04/11/2013 - 11:58 | 3436739 nbsharma
nbsharma's picture

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.

Thu, 04/11/2013 - 13:35 | 3437153 JeffB
JeffB's picture

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.

 

 

Thu, 04/11/2013 - 11:58 | 3436743 Chappy
Chappy's picture

So what's the trade here for us less sofisticated traders? Short jpyusd?

Thu, 04/11/2013 - 12:04 | 3436772 Canucklehead
Canucklehead's picture

It depends on how sofisticated you really are.  You may look at gold, or Cyprus Pounds, depending on your level of risk.

Thu, 04/11/2013 - 12:17 | 3436834 adamas
adamas's picture

sofisticated reply!

Thu, 04/11/2013 - 12:01 | 3436760 buzzsaw99
buzzsaw99's picture

The 30y usa treasury is the best investment on Earth right now.

Thu, 04/11/2013 - 12:12 | 3436808 ATM
ATM's picture

How can that be so when the usa treasury is broke?

Thu, 04/11/2013 - 12:48 | 3437020 BooMushroom
BooMushroom's picture

That and Facebook coins.

That and Facebook coins and iTunes credits.

That and Facebook coins and iTunes credits and tulip bulbs...

Thu, 04/11/2013 - 12:05 | 3436770 q99x2
q99x2's picture

Maybe it will cause a 12 hour cooling off period. They make some piss-poor exchanges in Japan.

Thu, 04/11/2013 - 12:05 | 3436777 Dr. Engali
Dr. Engali's picture

Looks like I picked the wrong day to stop sniffing glue.

Thu, 04/11/2013 - 12:08 | 3436789 Bearwagon
Bearwagon's picture

I'm quite sure a local dealer should be able to offer you viable alternatives  ;-)

Thu, 04/11/2013 - 12:07 | 3436779 jbvtme
jbvtme's picture

the island is puking fukushima radiation and there is some other panic trade?

Thu, 04/11/2013 - 12:18 | 3436840 Al Huxley
Al Huxley's picture

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'.

Thu, 04/11/2013 - 12:08 | 3436784 Confundido
Confundido's picture

Bearish of gold.

Thu, 04/11/2013 - 12:07 | 3436786 yogibear
yogibear's picture

Japan, 

Hyperinflation is in your future. massively print into it, thank you.

Warming up is Bubble Benny and the Fed.

 

Thu, 04/11/2013 - 12:11 | 3436801 ATM
ATM's picture

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.

Thu, 04/11/2013 - 12:17 | 3436833 Al Huxley
Al Huxley's picture

Don't ruin the party for everybody by barging in and talking sense.

Thu, 04/11/2013 - 12:37 | 3436967 kentmills
kentmills's picture

ATM - WTF - Somebody junked you?  Does the troll think the BOJ can print wealth?

Fri, 04/12/2013 - 02:35 | 3439778 Trampy
Trampy's picture

"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.

Thu, 04/11/2013 - 12:12 | 3436812 PUD
PUD's picture

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

Thu, 04/11/2013 - 12:16 | 3436823 Satan
Satan's picture

Can this panic not wait until after lunch?

Thu, 04/11/2013 - 12:19 | 3436845 Bearwagon
Bearwagon's picture

See my comment above ...

Thu, 04/11/2013 - 12:33 | 3436837 kevinearick
kevinearick's picture

 

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?

 

Thu, 04/11/2013 - 12:16 | 3436839 Smuckers
Smuckers's picture

Mmmm...whale tail. 
Costs $14.95 to watch from a hotel room...but it's here for free.

Thu, 04/11/2013 - 12:18 | 3436850 Bearwagon
Bearwagon's picture

Thar she blows!

Thu, 04/11/2013 - 12:19 | 3436854 venturen
venturen's picture

I thought ctrl-P was for printing...you mean it is for PANIC?

Thu, 04/11/2013 - 12:20 | 3436863 kaa1016
kaa1016's picture

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...

Thu, 04/11/2013 - 12:28 | 3436900 yogibear
yogibear's picture

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.

Thu, 04/11/2013 - 12:29 | 3436919 Schmuck Raker
Schmuck Raker's picture

What time is the Pre-Release of Treasury Auction Results?

Thu, 04/11/2013 - 12:30 | 3436922 Downtoolong
Downtoolong's picture

the 30Y US Treasury bond is now the highest-yielding 'safe asset'.

Safe ??? So they  say, until interest rates go up.

Thu, 04/11/2013 - 12:29 | 3436926 realtick
realtick's picture

stock market top watchers - keep in mind today is 4-11

Thu, 04/11/2013 - 12:46 | 3437010 Shizzmoney
Shizzmoney's picture

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).

Thu, 04/11/2013 - 12:58 | 3437071 The Dancer
The Dancer's picture

Speaking of panic, my instincts tell me that the WH is on the verge of a mild panic itself....to be continued....

Thu, 04/11/2013 - 12:58 | 3437072 The Dancer
The Dancer's picture

Speaking of panic, my instincts tell me that the WH is on the verge of a mild panic itself....to be continued....

Thu, 04/11/2013 - 13:06 | 3437105 thewayitis
thewayitis's picture

 

  You can only eat your own SHIT so long before you PUKE........

 

 

Thu, 04/11/2013 - 13:09 | 3437120 bnbdnb
bnbdnb's picture

So whats the update? Its past 1pm est.

Thu, 04/11/2013 - 13:13 | 3437143 q99x2
q99x2's picture

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.

Thu, 04/11/2013 - 14:12 | 3437422 Meat Hammer
Meat Hammer's picture

I set my panic alarm to wake me up from my nap at 10:00 PDT.  Did I miss anything?

Thu, 04/11/2013 - 16:08 | 3437925 LynRobison
LynRobison's picture

I imagine that once again the powers that be have managed to steady the wobbly table on which this house of cards is built.

Thu, 04/11/2013 - 17:06 | 3438173 Freaking Heck
Freaking Heck's picture

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/

 

Thu, 04/11/2013 - 19:07 | 3438717 Decimus Lunius ...
Decimus Lunius Luvenalis's picture

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. 

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