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Another 3-Sigma Bond Dumpfest Breaks Out In Japan's Late-Session As Equities Bounce

Tyler Durden's picture


It seems that the BoJ has decided that the equity market rally (for now) takes precedence over a JGB market 'intervention'. After oscillating around unchanged for much of the late morning, Japanese stocks are testing the highs after the break - up around 1% (dominated by Consumer Goods and Industrials up around 2% as Utilities are hammered -4.75%). The problem is that Japanese government bonds are becoming the high beta correlated unintended consequence of this effort. While stocks are near their earlier highs, JGB futures are notably lower relatively speaking. JPY is not helping as the correlation to that devaluer-of-first-resort seems to have faded. Of course, to the clueless onlooker, a 0.50 drop in the price of a JGB would seem negligible, but as we have discussed, it is relative to the capital reserved to cover these swings. Today's move is a 3-Sigma swing in price for what is still considered high-quality repo-able collateral (for now).



Once again it seems, be careful what you wish for is the order of the day for equity bulls - as the market is clearly not happy to just accept the BoJ's word that they have control and that this swing does not represent fundamentals...

and some context for the equity bounce...


Charts: Bloomberg


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Tue, 05/28/2013 - 00:23 | Link to Comment ApollyonDestroy
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Just hurry up and buy!

Tue, 05/28/2013 - 00:29 | Link to Comment EclecticParrot
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'3-SIGMA Bond Dumpfest'"  sounds like a fraternity party at Wharton

Tue, 05/28/2013 - 00:36 | Link to Comment disabledvet
disabledvet's picture

have to wait for the US open. (currently we have the French one underway.) obviously no one on the planet is pining for Japanese fail. sorry but "planet earth is out of liquidity" in my view. if Japan gets shut out of the repo market guess what...parabolic move in the debt. "devaluation time." equities might love it at first...Team Depends indeed will be the decider however. you can get massive capital flight if it's not "done" correctly (is there any way a devaluation is done correctly?) i've seen here where the USA is running a massive trade deficit with Mexico. "not for much longer" comes to mind if the Yen drops to under 400 to a buck. MASSIVE inflation to boot...

Tue, 05/28/2013 - 00:53 | Link to Comment lolmao500
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A post about that sack of shit Larry Summers in the lead to be the next head of the FED would be greatly appreciated... thanks ZH.

Tue, 05/28/2013 - 05:59 | Link to Comment malikai
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I just threw up a little.

But why am I not surprised?

Tue, 05/28/2013 - 07:34 | Link to Comment buzzsaw99
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That is the best thing that could happen from a zher perspective. Summers is a wrecking ball. The fed would be destroyed before his first term was up.

Tue, 05/28/2013 - 00:59 | Link to Comment SHEEPFUKKER

Can't we just have a time when Nikkei, JGB's, and Yen all dump and get this shit over with already?

Tue, 05/28/2013 - 01:02 | Link to Comment chump666
chump666's picture

Classic preclusive purchasing play going on.  I think Abe sitting in a fighting jet with the unit 731 number on the side was the last straw.



Tue, 05/28/2013 - 01:15 | Link to Comment suteibu
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But Kuroda said there will be no problems if the interest rates rise by 1% or even 3%.

"Even if interest rates rise by this degree, as long as the rise is accompanied by improved developments in economic activity and prices, there are no major concerns over possible instability in the financial system, as financial institutions' profits will be boosted," he said.

And, of course, the reason for this is...

The central bank chief said an increase in asset prices will have "positive effects on the real economy by means of the wealth effect," as long as it reflects the policy effects or improved outlook for the real economy.'s all working as planned.  No one should worry.  In fact, everyone should hurry up to join the massive wealth being created in Japan by the innovative Abe and the brilliant Kuroda.

Tue, 05/28/2013 - 01:33 | Link to Comment chump666
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A bond vigilante has f*cked up the demand curve for JGBs, and since Japan holds 90%, it was  an offshore disruption. 

This should have happen on US markets, but alas it hasn't...yet.  But it will before the Fed goes 100% owner in three years +.

We are witnessing the total collapse of markets as we know it. This is the beginning.

Don't mean to be doomy

Tue, 05/28/2013 - 02:38 | Link to Comment Awakened Sheeple
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Please do not worry.

Tue, 05/28/2013 - 07:22 | Link to Comment GetZeeGold
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The fuel tank for my normalcy bias engine is topped off at full......and it's running at full speed.

Tue, 05/28/2013 - 06:59 | Link to Comment BandGap
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We're halfway through the beginning. It's not "don't worry", it's "don't panic".

Tue, 05/28/2013 - 07:15 | Link to Comment asteroids
asteroids's picture

There is no "wealth effect". What fucking bullshit. Another fairy story dreamed up by central banksters. The market has doubled. Do YOU feel twice as rich? Didn't think so.

Tue, 05/28/2013 - 01:17 | Link to Comment Kirk2NCC1701
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As we've recently learned, it's not a real issue till we see a >7 sigma swing.  ;-\,

Tue, 05/28/2013 - 02:09 | Link to Comment Awakened Sheeple
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Do any savvy insiders here have an idea of when banks start pulling in reserves to offset the declining value of Japanese bonds? The rout has been on for several weeks. Thought it would have happened by now.

Tue, 05/28/2013 - 02:37 | Link to Comment Dead Canary
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Another cruise ship catches fire.

I think we should allow illegal Mexicans to come here, but only if they travel on CRUISE SHIPS!

Tue, 05/28/2013 - 06:04 | Link to Comment malikai
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What's the over/under on them going bankrupt this year?


What's the over/under on them getting TBTF status?

Tue, 05/28/2013 - 07:33 | Link to Comment GetZeeGold
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I try to stay away from boats. Everytime I get on one.....bad stuff happens.

Tue, 05/28/2013 - 08:38 | Link to Comment cro_maat
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I heard that Timmy and the Bernanck were at the beach in the Hamptons this weekend with metal detectors because they have been reading about all of the boating accidents on ZH :)

Tue, 05/28/2013 - 03:36 | Link to Comment ebworthen
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They will just massage the timeline.

"Oh look, the Nikkei and Topix are both up since intervention."

But, sooner or later, it will blow up - just like the cotton candy U.S. Stawk Mawkets.

Tue, 05/28/2013 - 03:53 | Link to Comment One And Only
One And Only's picture

All the "convexity" is in Japan right? 

You Kyle Bass faggot sheep.

No one gives a shit about Japan. I don't give two shits about Japan. Bernaneke or the ECB or China will print the difference.

Yea the U.S is the largest debtor nation in the world, but guess what else? We discovered NUCLEAR WEAPONS. So guess who has the FUCK YOU card?

We also have the digital advantage. Not only did we create the the internet, we ALLOW fuckers to hack us, than we snatch them up and make them work for us.

No country has an advantage on us.

But Japan holds a large amount of U.S debt right? So guess what? Bernanke buys it all.


Tue, 05/28/2013 - 04:14 | Link to Comment dogbreath
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who would have thought from such a thoughtful post that you've been a member for only  two weeks

Tue, 05/28/2013 - 07:30 | Link to Comment Dead Canary
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What you see here is a new kind of troll. The people who have a bug up their butt about libertarians are supposed to read posts like this and say:

"See, I knew it. Zero Hedge is for evil hateful conservatives!"

Look for posts like this to be featured on Rachel Maddow.

Tue, 05/28/2013 - 17:04 | Link to Comment dogbreath
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seems to be lots of new faces around here with many of the old gone silent or lurking.  sad

Tue, 05/28/2013 - 17:02 | Link to Comment dogbreath
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Tue, 05/28/2013 - 05:53 | Link to Comment Room 101
Room 101's picture

Another dipshit troll. Right? 


Tue, 05/28/2013 - 07:39 | Link to Comment GetZeeGold
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Maybe not a dipshit......could be a full tilt retard lashing out.

Tue, 05/28/2013 - 06:44 | Link to Comment Karl von Bahnhof
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You, sir, are yet another living proof of merican decline. Stubborn, badly educated, agressive and arrogant. What a winning combination!

Tue, 05/28/2013 - 04:58 | Link to Comment besnook
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bonds go down. market goes up. the simplest correlation. but bonds aren't going down because things are better. there is not that much more economic activity. bonds are going down because it sux. but equities are up so it is doing exactly what any self respecting algo would have it. fn brilliant trading case study.

Tue, 05/28/2013 - 05:05 | Link to Comment NipponMarketBlog
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I'd rather be long vol than short equities here....

Tue, 05/28/2013 - 05:11 | Link to Comment l1b3rty
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This might be a rocky US open with news out of Europe and China...

Tue, 05/28/2013 - 06:17 | Link to Comment disabledvet
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Yet again "light on the news flow." being paid to have stories taken down now...or not reported period? Hmmm. You know how folks love to be surprised when it comes to money...

Tue, 05/28/2013 - 07:50 | Link to Comment timbo_em
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2013 or the year when the Japanese bug finally will find its windshield.

Do NOT follow this link or you will be banned from the site!