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...

  • *SAKAKIBARA SAYS MOVEMENT OF EQUITY PRICES `SOMEWHAT BUBBLY'

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