JGBs Suffer Worst 4 Days In 10 Years As Nikkei Tops 15,000 First Time Since Jan 2008

Tyler Durden's picture

The Nikkei 225 just passed 15,000 for the first time since January 2008 no up over 77% from its November 2012 lows. Even "Mr Yen" is worried...


But the real story is in bond land. Twice last night Japanese bond futures were saved miraculously from a third day in a row and at the open this evening JGB futures are looking set for another test of the limit down (though being saved for now) - as 10Y yields spike above 90bps (+5.5bps on the day), the highest in 13 months; and 5Y yields jump another 5bps to 45bps - the highest in 22 months. The last 4 days in 5Y JGBs has been the worst in 5 years (since June 2008) and 10Y JGB's worst 4-days in 10 years (since August 2003). USDJPY is holding below 102.00 as it seems for now the JGB weakness is soaking up the inflation threat (as we discussed here). Amid all of this turmoil, JGB implied volatility is collapsing to 4 month lows - which smells a lot like hedges being lifted along with underlying risk unwinds.


No Bubbles here...

Remember, nothing goes up forever (and equities are NOT a good inflation hedge away from the normal)...


What us worry? The cost of energy for the Japanese is bumping up against economy-limiting levels once again as they crush the JPY...


JGB Futures have not been happy but are being 'saved' from another halt for now... even as the cash underlying is ugly


This is what is going on in JGBs... JGBs were able to rally since smart money was hedging significantly (and not selling) but once the initial clusterfuck exploded after the BoJ meeting (and protection costs soared), it seems clear that JGBs just became far too expensive to hold given their risk and so protection was unwound and positions were reduced... which is why we are now seeing JGB yields jumping...



5Y JGB biggest 4-day loss in 5 years


10Y JGB biggest 4-day loss in 10 years


and for all those guffawing at the fact that rates are still so low... remember the surging cost of debt that will impact the Japanese economy each time they roll the quadrillion Yen debt load...


Charts: Bloomberg

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gatorengineer's picture

they are less effed then we are all things considered.

Stoploss's picture

I can't hold it in any longer.

The great rotation out of bonds and into stocks??  Really?  Sell high, and buy higher right?  That's how it works?


Keep knocking gold down an see what happens, the central planners are being set up.

Well done CP's, well done.

Two bond markets are going to implode, and guess where that fiat will find it's trading partner? Stocks? Based on the all powerful an mighty American consumer?? That doesn't have a job??? 

Oh, and hearing the miners troubles of late means...

Dey aint no mo golt bitchezzzzzzzzzzz.............

Buck Johnson's picture

Your 100% correct, this is going to end real bad and many know it.  Japan is going to implode and it will hit the US like a nuclear bomb.

otto skorzeny's picture

no-really-400% debt to GDP is GREAAAAT/sarc

Cdad's picture

Seems to me some "smart money" guys were guffawing at Kyle Bass during the Sohn conference.  Isn't this the Kyle Bass scenario unfolding exactly as he said it would?  

Anywho...I'm sure the FastMoney guys will explain it all away tomorrow, as they chase Netflix and Tesla.  Keep buying on the "World has not ended...yet" trade.

otto skorzeny's picture

Man is a basically a pack animal-like wolves-no one wants to be shut out of the pack and the guys like Bass will always be mocked by the "cool kids in school". fuck'em

Cdad's picture

Joseph Weisenthal tweeted in regards to this post from Tyler.  If you don't know him, he is the executive editor of Business Insider.  His response to this JGB story was, and I quote, "LOL."

So there  you go...straight from the inside view of business...the "turning" of a 25 year bond run for the nation whose debt/GDP ratio is second to none...gets laughter from that particular shill outlet.  

Just passing this along to the faithful, and wishing Kyle Bass well.  Passing it along, as I follow this tool on twitter...and it is painful...so do me a favor and take some of that pain off of my shoulders.

Thanks...your brother Cdad



M2Market's picture

I Love it!  This is exactly the response you want if you're on the other side of the trade. 

If he agrees then I would re evaluate the timing of this bet

tmosley's picture

They are "less effed" than us, in the same way that that a guy getting shot in the head with a tank shell is less fucked than a guy getting shot in the head with a depleted uranium tank shell.

DormRoom's picture

"Neoclassical growth theories normally do not distinguish the overall population from the working-age population for reasons of analytical simplicity. However, without taking into account the distinction between the two variables explicitly, the very challenges that Japan is currently faced with will be outside the scope of analysis." - Masaaki Shirakawa, former governor of the Bank of Japan.


src: http://www.boj.or.jp/en/announcements/press/koen_2012/ko120530a.htm/


No new babies, Japan needs to export its way to growth to compensate for an accelarated aging population.  Thus crush the yen.  The wider consequence is the aging baby boomer population in advanced economies (huge demographic bulge), and the need for nation states to export their way to growth, all at once, because of this demographic shift.  Not an ideal condition for global harmony.

asteroids's picture

Remember it takes almost 20years before a baby is usefully productive. Somehow I don't think this insanity will last that long.

pods's picture

20 years?

You aren't talking about American babies are you?


otto skorzeny's picture

in the USA you never have to grow up(I blame Disney)

otto skorzeny's picture

when we need more consumers in the US to keep the "growth" Ponzi going we just let the Mexicans flood in and piss in our gene pool. the fact that countries always need to grow their population through immigration of braun untermensch is some champaign socialist's delusion.

khakuda's picture

Stocks are back at 2008. If yields go back there too, they are screwed.

sfisher's picture

I believe they are effed first, but our time will come.

Yen Cross's picture

      Perfectly illustrated blow off top.

fonzannoon's picture

Yen, you think the JGB's have topped out?

Yen Cross's picture

    Watch the curve Fonz.  That's what I'm doing.( Europe-Asia-South America)


otto skorzeny's picture

are the etfs like JGBS or JGBD a good way to play this?

Yen Cross's picture

     Otto, don't be a dik head. 

    You're the expert at that. As a currency trader, the United States and Japan are closley linked on all things sovereign debt.

  For instance; What happens to usd/jpy when the yield in U.S. Treasuries goes up? You sit tight.

M2Market's picture

What do you think yen?  So far US 10yr/JGB spread hasn't blown out yet but it s showing signs of stress already but when it does is when hell is unleashed on Japan.  Same thing goes for bund/JGB spread

Yen Cross's picture

  Based on usd/jpy, I think the BoJ is worried about losing control. I laughed when Morgue Stanley', called the top in usd/jpy a few days ago! That was better than a Stolper eur/usd miss!

  I would be moar worried about bund/Oats spreads.

M2Market's picture

When that negative feedback loop starts to form between USDJPY and JGB is when the samurais get ready to commit seppuku.

Had outright short oats cost me a litttle when the oats exploded a while back...  Don't understand that pop still but I suspect Japanese money was involved.  Always thought that short cac40 was the way to go since theyFrench can't print as freely as the BOJ

Yen Cross's picture

  You suspected right my friend. France and Italy.  Don't chase trades.

   The French are bound to the euro, as is Italy. You already knew that?

TumblingDice's picture

Juicing equities at the expense of sovereigns. A quick statistical study of past occurances shows that this ends with tears 100% of the time.

Surrealist's picture

Bullish on raw fresh human hearts imported from Syria




M2Market's picture

I believe this is just the beginning... JGB's are so frontloaded and top heay it would be like Acapulco cliff dive... When it really starts to go parabolic the only question is how fast before it becomes worldwide headlines and mass panic.  The fear will feed on itself and the BOJ will be the only buyer left in the market at that time.  This shit is going to get very real

Yen Cross's picture

     I thought you might enjoy this link. Click on daily [1D] , if you need to.


lickspitler's picture

Essentially , this is a rock in the Pacific where they eat raw fish.


I remember when Bank of Tokyo , Tokyo.   Was know as Teeth and Glasses, Teeth and Glasses

OneTinSoldier66's picture



I want to ask some things about this article that may seem like I'm nitpicking. I can assure you I'm not. I have a lack of knowledge or understanding about something that I am curious about.


1) "Twice last night Japanese bond futures were saved miraculously from a third day in a row..."


Is there a typo in there? As in some word(s) left out?


2) What exactly does "saved" mean in this article? Are they just not halting the trading? How is that "saving" the JGB futures at the blue pointed arrows and only where there are blue arrows? It seems to me that if they are just not stoppping the trading, then you could put a blue arrow on any pixel in the chart and say that JGB futures were "saved", at any point on the chart since the last time they halted trading. I am lost at how JGB's were saved at only the blue arrow points. I need some information on just what occured at the blue arrows points. Could you give me a description of what someone, some people, they(?), are doing to "save" the JGB futures market? Just ignorant and curious here.


Thank you!

chindit13's picture

This might not answer your question, but "halts" occur all the time in Japan.  It is built into the system.  It is, however, rare for JGBs to be halted due to downside moves, as they have largely been a one way bet since 1990.  When the Nikkei began to tumble in 1990, there were days when there might be a half dozen or more trading halts in a session.  On any given day, one can probably find numerous single name equities that are halted due to an order imbalance or a gap price move that touches the allowable short term limit.  The halts are automatic, programmed into the machines.  There is no person or group who decides to call a halt.

OneTinSoldier66's picture

Thank you very much chindit13. That was definitely info/knowledge that clears up things tremendously.



Herdee's picture

Maybe the Japanese Market will come crashing down at the same time as the S&P 500?Double bubble.

Bay of Pigs's picture

"somewhat bubbly"?

Yeah, like molten lava...

The Fonz...before shark jump's picture

Fed owned dtcc sets up shop in Japan in march....

Fed member firms licking their chops to naked short this baby down big time when ready...

So obvious

LetThemEatRand's picture

Since they are deliberately crushing their currency, it's a good thing that they didn't recently have a big nuclear plant meltdown.  Imagine how much more oil would cost if they had a big increase in the need for oil and a depreciating currency with which to buy it.  But then again these are problems for the little sheeple that don't fit neatly into the economic models of the Ministry of Central Banking and Magic, so who would care anyway.

lolmao500's picture

Yield still too low... damn halts... if there were really a free market, the rates on Japanese bonds, most European bonds and American bonds would go sky fucking high in a single day, bankrupting them all immediately, leading to worldwide riots and probably civil wars between the statists and their leeches and the people who want to be left the fuck alone.

lolmao500's picture

QE is working in Japan... QE = create inflation... = winning!

/even if it's by deflation or only for the rich invested in the stock market...

Yen Cross's picture

  Just like Argentina.  Winning, http://www.google.com/finance?q=USDJPY  Don't forget the base currency always comes first. The trade will look inverse.

lolmao500's picture

I meant devaluation, not deflation...

They trynna catch me ridin dirty's picture

Does anyone know a definitive point when the BOJ's Abenomics printing actually started?  Or has it not even started yet?  Have they moved past the 'just talk' phase yet?