Japanese Stocks Open +1.5%; Bonds Half-Way To Limit Down

Tyler Durden's picture

It seems the correlation to USDJPY has started to disintegrate and what is more worrisome for the BoJ is the linkage between JGBs and the Nikkei 225. Equities in Japan are about to open to a modest bounce around 1.5% but JGB prices are down around 0.50 (half the limit-down price moves). So, the problem for the BoJ is - do you let JGBs flop to maintain your equity market's appearance of normality? Or are Japanese stocks about to be as implicitly repressed as the bond market? It would appear TPTB are doing their best to ramp the JPY to keep this bounce alive (USDJPY opening just shy of 102.50).

  • *AMARI SAYS BOJ IS COMMUNICATING CLOSELY WITH MARKETS (we suspect the market is communicating back even more)

As The Telegraph's Jeremy Warner noted:

What the subsequent violent gyrations in markets indicate is that any hint of applying the brakes risks generating a fresh financial crisis, which in turn would render the economic recovery still born. Both financial markets and the real economy have become addicted to "quantitative easing", such that they can't do without it.




Central bankers dream of getting back to "normal" – normal interest rates, a normal balance sheet, and so on. But that point isn't going to come any time soon. They are stuck on a money printing treadmill, and there appears no way off.




Japanes stocks made it to the 38.2% retrace just like the S&P 500 did and faded...



Careful what you wish for on the rebound... JGBs heading for limit-down (inverted below to show correlation)


and longer-term - JGBs have some room to the downside as the BoJ loses control...


JPY being dumped hard to keep the dream alive...


Charts: Bloomberg

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Spitzer's picture



It looks like Japan finally did it. They QE'd to the point that rates rise rather then fall. Who would have thought ;) The 10 year JGB was at .45% before they went full retard. Post full retard, it is now yielding 1% and climbing.

At this point they are so completely and totally screwed that they have one option left.(that I can see) The BOJ could blatantly lie and disclose that they are slowing down QE and that they will only target 1%. And rather then slow it down, they could speed it up with the hope of turning sellers back into buyers.

With that in mind, why don't the central banks just blatantly lie anyway ?

Why do they have to tell us what they are doing ?

SWCroaker's picture

"Why don't Central Banks just blatantly lie anyway?"

You sir, just gave me the best laugh in years.    Thank you.

Spitzer's picture

I mean on POLICY.

Do you think they lie about open market operations ?


SWCroaker's picture

I can honestly say I think they lie about everything.  It is habitual, part of the culture.

Specifically on Open Market operation, yes.  "We will not monetize the debt".   Yet they are, on average, the proud buyer of over 75% of US Treasury Bonds issued this year.   Done in a shell game shuffle with the cooperation of the Big Bank Direct bidders, but done, nonetheless.    Hello?   Maybe by buying only 75% of all issued, they're only committing 3/4ths of a lie?

Much of their "repo" purchases involve paying newly manufacture bit money for hefty bags of toxic non-performing MBS.  So not only does the Fed own the bulk of US Treasuries, they own most of the US mortgages.  They lied big time paying par for that crap, and there is an ongoing lie in never disclosing what sort of payback they get over time. 

"Setting interest rates" ultimately is accomplished by artificially creating or constraining the supply/demand of bonds.  Forcing them to go anywhere other than where a free market would set them sends a huge LIE to those involved in capital allocation.  It says that money is cheaper/more expensive than it REALLY is.  So the Fed LIES to businesses and investors to get them to do things that they would not do otherwise.

The money they create is debt, itself a lie.  They admit that they really don't care about the interest they're owed; they "gift" it back to the Treasury every now and then.  So their pretense of public service and or operation for profit is a lie; their actions all point to it being about power.

Manthong's picture

the gorilla in the room is the fact that the Fed has backed, swapped, repo'd, chopped, chromed and toasted everything that hypothetically exists as an idea of a promise of a pledge of credit.

Sam Clemons's picture

The problem with money as debt is that you always need more money than exists to pay off said debt with interest.  About 2.5 times as much as the present value, always.  And, any fixed percentage rate of growth in debt eventually requires exponential growth in the debt.

Manthong's picture

Gee, Sam.. you make it sound like any of this has a connection to real economics,,

You might want to reconsider the propositions V conditions upon which your premises are based.

You are correct, but it's not like it matters in the new normal.

It's not the economic distortion, deformation or the power structure I am concerned about,.. it is more about what it is going to do to the kids.

thelibcentury's picture

+1, being accurate and precise about things this important is of high value.

gatorengineer's picture

Did Benny lie when they said they werent monetizing debt?

infinity8's picture

If only that would translate into funny if that's what they do.

PiltdownMan's picture

Exactly. The Japanese sov curve has risen instead of falling.

Fuku Ben's picture

They have to present the illusion of confidence and being experts that know what they're doing even when its clear they're screwed. 

But since they're already lying do they

A: Tell lie upon lie and save bigger face now ending in jisatsu later when they are wrong and get caught

B: Expose the old truth surreptitiously wrapped with a new lie to save some face for the next possible escape plan, if there is one available

C: Contact the NSC and tell them to fire up all the remaining plant because they'll need some more melt downs as a distraction to cover the SHTF financial meltdown soon

Precious's picture

Japan's 3-month equity bubble is not going to unwind in a day.  It will probably take at least a week.

Nikkei 8000 here we come...

Tsar Pointless's picture

You forgot a 'zero' after the eight.

THX 1178's picture

No, that's two weeks from now.

DeadFred's picture

Could be either way. Watch the futures. I just took a glance and saw a rise of 100 points then loss of 75 points in about 15 seconds for the round trip. Market stability for sure. 

Tsar Pointless's picture

Stawks>government bonds.

Count on it.

TrustWho's picture

With that in mind, why don't the central banks just blatantly lie anyway ? Why do they have to tell us what they are doing ?


You think Central Bankers tell you the TRUTH?

Spitzer's picture

I mean heavy duty lies. Like telling everyone they are going to tighten when in fact they loosen. Do you think they do that ? 


maybe , I dunno

SWCroaker's picture

I like you.   In a platonic way.

Have you noticed in a Holmes-ish way that the Default Dog "isn't barking"?  

Years back, every state here in the US was racing towards insolvency.  Many cities were.  Unemployment reserves were being exhausted.  Medicaid roles were being shut down, because they couldn't handle the bills they were getting.   Whitney was saying "we're in for a world of hurt".   Cut to today: other than a few cities that have been allowed to "go Lehman" what news?   Nobody's broke.   Revenues still suck.  Expenses thru the roof, but gosh darn it you know the checks keep going out the door, and they don't bounce.  Recovery?   I don't think so.   Somebody is funneling money, and it isn't showing up on the books.  Matter of National Security, at this point.

Look at Europe.  Prior to joining the EU, each country had a central bank.  After joining, they still had a central bank.  *All* of those countries, even the "best", run deficits and have growing debt.  Crises come and go, interest on country X's bonds go up and down, but have you noticed none of the checks ever bounce.  What on earth prevents the central bank of crappy country X from simply electronically honoring all of it's government checks?   How could Brussels ever stop them from electronically printing?  How would they ever know the details of what is being done inside country X's computers?   When Brussels "allows" them to deficit spend by X% of their GDP, doesn't that imply that country X has a bank with the capability to electronically print money?

I think the ebb and flow of the interest rate crisis in Europe is A LIE.  They pretend to be on the verge of default, and the interest rates on their debt rises to oh my gosh levels, but it is all just a sham to push the latest austerity measure, and take a few more steps towards Federalization.  With or without central EU approval, some bank more under the control of the country than headquarters in Brussels will flip some bits, and the check's won't bounce.

thismarketisrigged's picture

if the nikkei sells off again tonight, wall st will not follow .


if nikkei gains like 4 percent back tonight, wall st will go green 4 percent and follow nikkei, even though today it had not desire to do so.



thelibcentury's picture

Another way to say that

"My name, mu name, my name. My name my name my name!"

Atomizer's picture

Japan officials convey, the panic is currently behind us. C'mon back in, the water is comfy!

GMadScientist's picture

Anyone know Nihongo for 'naked short'?

Mine Is Bigger's picture

I know short-selling is "kara uri (empty selling).  But ...

OK.  So, according to Wikipedia, naked short selling is "hadaka uri (naked selling).

Racer's picture

Oh Sh!t who is selling, can someone shoot them quick, we must get this charade, er  market soaring again, monitor and block all sell trades on the NIK. NO ONE allowed to sell, you HEAR ME

NO ONE ALLOWED TO SELL or I will cut off your dangling extremities and then your LIFE if you still fail

Cursive's picture

The quote from Amari is worthless.  All cultures have a bias toward protecting the status quo/TPTB, but no culture is so fall-on-your-sword-protect-authroity like Japan.  Now, the Nipponese can reap what they have sown.  Will Americans and Europeans sit idly by for the same?

thismarketisrigged's picture

i know its early ( sadly because as the night goes on, i can only imagine how high they will be) but s&p futures are already up 6 pts and dow futures are up 50 pts.


on what you may ask? nothing.


is it just me, or do i feel whenever we finish red, even if it is as little as 10 pts dow, futures spike like crazy overnight on nothing?

Tsar Pointless's picture

It's not you. It might be me, but I'm not certain.

Anyway, the Dow will be up 100+ tomorrow, and the S&P will be near 1670 once again.

Just in time for the unofficial beginning of summer and the all-you-can-eat orgy in the Hamptons.

Cdad's picture

You guys must be weekend warrior bears. 

Tsar Pointless's picture

No, I just play one on TV.

WTFUD's picture

oh what a tangled web we weave. . .

buzzsaw99's picture

this is all going according to plan

Uchtdorf's picture

"It would appear TPTB are doping their best"

Possibly THE BEST typo evah!

Dr. Engali's picture

Hello market... This is Amari.... So how's your day? The kids doing alright? I just want to keep an open line of communication with you. We're really going to fuck things up if that's alright with you. Okay have a nice day. Talk to you later. Sayonara.

Tsar Pointless's picture

Nikkei up 3.5% now.

Last night is long forgotten. If, as here in America, it was even paid attention to while it was happening.

Spitzer's picture

who cares about the stock market.

The bond market is where the rubber meets the road.

buzzsaw99's picture

clearly abenaked and bernaked care more about their stock markets than bond markets

thelibcentury's picture

But, but they will just buy them, right?
Please, do not worry.

MoneyChasingReturns's picture

Why would anyone lend money at 1% interest to anyone, let alone a bankrupt government with no youth workers to pay its debts. I smell a rat, mastercard and visa charge poor people 25% interest, why should a poor country pay 1%?

I'm beginning to understand one is best to save and invest in ones own passive income and live in high tax jurisdictions like France or Greece where one can collect dividends from offshore companies, and not work to pay tax like a slave. Just leave when they locals start being asked to eat cake, because the heads will roll.

Life is good off $5000/mo in passive income and no taxation. Who needs the stress of minding other peoples business?



Awakened Sheeple's picture

Memo to Tyler to check who is at their terminal Monday at the Fed.

Yen Cross's picture

     So we're trading the 38.2% Fibi back and forth until the margins are so tight the markets implode into a black hole, Tyler?


Fix It Again Timmy's picture

Japanese version of "Sophie's Choice".....

Whatta's picture

As Edgar Allan Poe once said...

"....BTFD, forevermore".

Or maybe it was someone else....I forget.