Japanese Bond Market Halted At Open As Bond Selling Purge Goes Global

Tyler Durden's picture

Japanese government bonds (JGB) futures have been halted once again this evening as the market opens down over 1 point. 10Y yields smash 11.5bps higher to 1.00% and 5Y yields add 6bps to 47bps. These are quite simply unprecedented moves in what 'was' a safe asset class and impresses yet another VaR shock on the market (as we detailed here). What this means practically is that Japanese banks push further into insolvency land (as we explained here) today's move wipes out another 1.5% of blended Tier 1 capital off the entire Japanese banking industry. Since the 10Y JGB yield lows of 32.5 bps on April 5, the move is rapidly approaching a full percentage point, or the parallel shift amount that the IMF warned would lead to 10% and 20% MTM losses for regional and major banks respectively. Today's jump in 10Y yields continues the post-BoJ regime of greater-than-six-sigma moves... something no risk model can withstand for three weeks. Just a good job the BoJ didn't have anything at all to say about this totally disorderly fiasco yesterday.

JGB Futures plunge to two-year lows...

 

leaving yields spiking...

 

10Y yields have now tripled from the post-BoJ meeting lows (in 7 weeks!!)

 

JPY is being sold like there's no tomorrow (which for the Japanese may well be true)

 

Meanwhile the Nikkei 225 is tearing hiugher once again - now up ovcer 85% from its Oct 2012 lows...

 

Charts: Bloomberg

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buzzsaw99's picture

almost 1% on the 10y omg it's teotwawki

The Shootist's picture

Shocking, don't see 10 bps every day.

flacon's picture

A MUST WATCH video explaining the significance of this:

 

 

Japan's Debt Problem Visualized

http://www.youtube.com/watch?v=Njp8bKpi-vg

 

(4% yield is mathematical economic death)

 

Crisismode's picture

 

 

The Yen follows next.

 

Wait, patiently,

 

tomorrow morning it blows up, and then, down.

Manthong's picture

omigosh.. why so ever would anyone not want to buy something that is depreciating by large amounts on a daily basis?

Meat Hammer's picture

Being that I am still barely out of diapers when it comes to investing and finance, are there any books or other media than anyone could recommend to help me understand the world of bonds and terms like Tier 1, effects of bps, etc.?  Many thanks.

Caviar Emptor's picture

Minsky! Minsky! Your moment is at hand!

Manthong's picture

Crack up boom boom?

maybe not until they burn the  alleged Tier 2 capital which  buttresses the system until the alleged deposits gets whacked by what is alleged to be a market.

Meat Hammer's picture

Minsky moment...very succinct explanation of what's going on...or aboout to.  Thanks.

Bearwagon's picture

+1 for good ol' Hyman reference. (Steve Keen mentions him often, too.)

noless's picture

Bond shock, yield up price down(to account for future rollover into higher yield), bond derivatives, or vice versa, currency, hit down for sale, as carry realigned between maturities(curve realigned to new expectations) currency flattens.

Sell, hot money hiTs currency (the sale)(up), assets redistributed for yield.

This is my laymans take, i honestly have no clue wtf is up.

But I'm guessing it will keep happening.

RockyRacoon's picture

Kyle Bass could probably explain it to ya.

Kyle Bass -- hell yeah!

noless's picture

I'll let you know next Thursday, thanks for the heads up.

AustriAnnie's picture

+1.  And Bass has too much class to rub it in their faces when he's proven right. I just want to see that humble shy "I TRIED to tell you so!" smile on his face when he gets interviewed by all the morons who tried to make him look like a fool over the years.  

 

Hulk's picture

Watch kyle Bass explain bonds and how they can blow up sovereigns overnight just like we see happening here. Go to youtube and search on kyle bass. Whats happening in Japan recently in regards to bonds is a big fucking deal and the only question left is what king of domino effect will the blow have world wide...

RebelDevil's picture

Add to that Max Keiser. He's been calling for a JGB crash 6 months ago, predicting it would happen in april.

Hulk's picture

Just remembered I can save you some time. A couple of months ago, Interest on the japanese debt was one quarter of Japanese tax revenues. When interest payments = tax revenues, its game over.

Thats why Japan has had 10 FinMins in 5 years and why they either commit suicide or check into mental institutions after they quit...

maxmad's picture

Rumors floating around that the next 2 days are going to be epic... The Nik potentially collapsing followed by the Dow... markets closing early, bank holiday... Happy Memorial day everyone!!

garypaul's picture

Again? I guess 2000th time might be the charm!

Hulk's picture

You know, when this shit finally blows, its going to be a horrible thing for us, but I'm hoping that these corrupt sons of bitches lose their goddamn heads...

andrewp111's picture

This little blip is just a correction. The real crash requires the DOW to be much higher first.

Mine Is Bigger's picture

The Nikkei is down a tad over 2% now.

klockwerks's picture

Flacon, thanks for the link, looks like deep doo doo for Japan

WmMcK's picture

Maybe TheBeginningOfTEOTWAWKI -- but I feel fine.

max2205's picture

Gee, what ever happened to ZIRP?

 

AndrewJackson's picture

When you consider their population demographics, interest expense, deficit to gdp, and shear size of their debt: I can assure you going from 32 bps to 100 bps is indeed quite scary. How sad is it that a 2% yield on a 10 year bond is where one of the greatest western ponzi's ever declares game, set, match.

LawsofPhysics's picture

Indeed, I hope the sovereigns of the west like to play dominoes.

Nick Jihad's picture

OK, but that increase in the 10yr yield is going to take ten years to feed into the Japanese government's bottom line, right?  The banks will face some ugly mark-to-market losses in the mean time, but we solved that in the US by suspending the MtM rule.

 

SRSrocco's picture

It is quite amazing to watch grown adults trade this kind of nonsense.  This is the very same kind of garbage trading that produced the SILVER FLASH CRASH on Sunday night.  Martin Armstrong stated that the reason why the price of silver fell nearly 10%, because there were a lack of bids.   How silly, it goes without saying -- especially in the thinly most traded time period of the day.  Anyhow, I replied to Martin Armstrongs bearish silver commentary in the following post:

RESPONSE TO: Martin Armstrong’s “Silver — the Flash Crash”
maxmad's picture

So this is how it ends!

lolmao500's picture

If the markets weren't that cooked and would stop ``halting`` every single time the free market tries to make a come back it would have been over a long time ago.

Cognitive Dissonance's picture

I can't wait until the wheels come off.

Wait.......

Stoploss's picture

LOL! A big one just flew by your head cog!

Look out!!

Time to look for some bond shorts eh?

Will the old TBT dog see it's day??

We shall see.

CClarity's picture

It will get REAL when they match US action today. Nikkei down and JGBs down (yields up) for a super whacky change up. And then the margin calls will get ripping and EVERYTHING will go whoosh! Time to be very fleet.

DeadFred's picture

Safer to short non-gov. bonds. They will rise with the interest rate environment but are less likely to be monetized. Junk bonds will be destroyed when this breaks loose.

Ness.'s picture

They're ALL junk bonds.

.gov bonds are backed by war.

andrewp111's picture

At least UST's are backed by nuclear weapons and the most powerful military machine in the world. You can't say that for JGB's.

jdkeller's picture

When the yield on your 10yr note goes up by ~2.5x in 2 months,  that is a problem!  Especially if your already spending 25% of revenues just servicing your current debt.

buzzsaw99's picture

someone is selling at a loss and it damn sure isn't the boj

Mike in GA's picture

Kyle Bass said a 2% move will blow them up.  They're halfway there.

LetThemEatRand's picture

I remember when Apple kept going up in parabolic form and it kept stopping out because the moves up were too big.  

fonzannoon's picture

Here we go bitches.

insanelysane's picture

you can only play if you buy. sellers need not apply.