"What Hath Kuroda Wrought?"

Tyler Durden's picture


We have been warning about the circular and adverse impact of soaring JGB yields since the day Kuorda announced the BOJ's new shock and awe "double the monetary base or bust" policy ("Is It Beginning? Biggest JGB Price Collapse In Over 10 Years Triggers TSE Circuit Breakers"  ,"Japanese Finance Ministry Warns Surge In JGB Volatility May Lead To A Sharp Bond Selloff", "Toyota Pulls Bond Deal Due To Soaring Yields: The Japanese "VaR Shock" Feedback Loop Is Back", and "Are Japanese Banks On The Verge Of Insolvency?"). Now the bond king himself joins the warning chorus fray (but not before the BOJ itself opined over the weekend on the schizophrenia of its own actions).

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Tue, 05/28/2013 - 12:06 | 3603787 Seasmoke
Seasmoke's picture


Tue, 05/28/2013 - 12:08 | 3603797 Quant Jockey
Quant Jockey's picture

I rather prefer 5150.

Tue, 05/28/2013 - 12:20 | 3603858 I am more equal...
I am more equal than others's picture

Kuorda Kaboke.

Tue, 05/28/2013 - 12:30 | 3603897 Say What Again
Say What Again's picture

Re: 5150

There's nothing like the sound of a drill motor through a 100 watt tube amplifier set at "11"

Tue, 05/28/2013 - 15:23 | 3604601 nantucket
nantucket's picture

that's one louder than 10

Tue, 05/28/2013 - 12:06 | 3603788 NotApplicable
NotApplicable's picture

Filed under: "Ooops"

Tue, 05/28/2013 - 12:10 | 3603811 El Oregonian
El Oregonian's picture

I think they sprung a leak in the Kuroda Artery...

Tue, 05/28/2013 - 12:07 | 3603791 fonzannoon
fonzannoon's picture

I've been tweeting this for weeks except I am not on twitter.

Tue, 05/28/2013 - 12:10 | 3603813 ekm
ekm's picture

Can you repeat the logic again?

How does JGP affect treasuries?

Tue, 05/28/2013 - 12:21 | 3603856 fonzannoon
fonzannoon's picture

It comes down to exotic financial products. In this case....


I know there is a Tyler out there who knows this better than I do...

Anyway... This is like reverse 2008. In 2008 the Yen strengthened and the banks were forced to buy the long end of the UST curve. This time around as banks hedge them against a weakening Yen they have to sell the long end of the UST curve. This is a big market. This is a big deal.

It's just funny listening to CNBC trying to pass off higher rates as a sign of the strengthening economy....


Tue, 05/28/2013 - 12:24 | 3603870 ekm
ekm's picture

Ah, it's a swap, hence a derivative. Thx.

Still, if it increses energy prices, they'll stop it.

Tue, 05/28/2013 - 12:28 | 3603882 fonzannoon
fonzannoon's picture

That is the irony ekm. It is the banks that are being forced to hedge by dumping UST's. I can't get into it in much more detail, I hope a Tyler will pick up the torch. In the meantime lets just call it a black fonzaswan.

Tue, 05/28/2013 - 12:29 | 3603892 ekm
ekm's picture


it is

Tue, 05/28/2013 - 13:05 | 3604077 RSloane
RSloane's picture

I like it!

Tue, 05/28/2013 - 12:33 | 3603905 ekm
ekm's picture

My conviction has been that the powers want the market to collapse but nobody wants to be blamed.


Enter Japan.

In exchange for Energy Exports to Japan, they would be ready to take the blame, which would mean that a couple of japanese primary dealers could go buuuuuuum.

Tue, 05/28/2013 - 12:34 | 3603914 fonzannoon
fonzannoon's picture

I always thought the market collapse would spark an initial run to treasuries. If this continues the collapse will start in bonds and who the hell knows where everyone will run to....apparently the S&P....

Tue, 05/28/2013 - 20:47 | 3605772 unununium
unununium's picture

Au and Ag sit in the corner patiently, since their manufacture billions of years ago.

Tue, 05/28/2013 - 12:28 | 3603883 M2Market
M2Market's picture

These jokers are about to blow up everyone else's bond market and their own..  The chronology of these events are important

Tue, 05/28/2013 - 12:22 | 3603862 bubblemania
bubblemania's picture

You would think the opposite would happen - sell JGB buy US Treasuries? Makes no sense to me. Perhaps it has to do with the Bond market fearing the QE tapering is for real.

Tue, 05/28/2013 - 12:24 | 3603867 LawsofPhysics
LawsofPhysics's picture

or a currency crisis...  

Tue, 05/28/2013 - 12:26 | 3603874 ekm
ekm's picture

My focus is always related to the real economy, particularly energy.

Japan is quite exposed to energy shocks. They can't risk that much with fudging money.

Tue, 05/28/2013 - 12:36 | 3603921 M2Market
M2Market's picture

you're right ekm I just fear that these jokers have overplayed their hand this time, and the perception of the marketplace is changing.  It never was a liquidity problem and yet these jokers treat it like it is, I fear that the WTI and Brent are going to a delta of 1 or perhaps more vis a vis the USDJPY as that's the only logical place for their cash to go, and once this psych loop is in place it will probably magnify once the rest of the investment community catches up, meaning for every one big figure uptick in USDJPY we might get 10 dlr rise in WTI/Brent, sometime down the road.

I hope this doesnt happen

Tue, 05/28/2013 - 12:38 | 3603927 fonzannoon
fonzannoon's picture

Ultimately it is a solvency problem but you can bet your ass right now there is a liquidity problem.

Tue, 05/28/2013 - 12:44 | 3603949 M2Market
M2Market's picture

I concur.  Those Gaussian VAR models all have new outlier boundaries now and they need cash to fill the captial requirements....

The fear is that the very act of selling the long dated USTs might generate more vol, which require them to raise even more capital.  The negative feedback loop lurks...

Tue, 05/28/2013 - 12:42 | 3603938 ekm
ekm's picture

There are two VIGILANTES in the world right now, both disastrous:


1) Crude oil price

2) Multy country courrency swaps, thus dollar avoidance.



Tue, 05/28/2013 - 12:34 | 3603908 CaptainSpaulding
CaptainSpaulding's picture

Fuck logic. I'm still trying to figure out what kuroda wrought means.

Tue, 05/28/2013 - 12:09 | 3603807 sunny
sunny's picture

Nikkei is up, Europe is up, US markets setting records...what IS the problem???  We should all be singing choruses of "Happy Days are Here Again!!", right??


Tue, 05/28/2013 - 13:11 | 3604113 disabledvet
disabledvet's picture

Collapsing equity prices pre sage a depression. Soaring equity prices pre sage inflation and a massive sell off in one's currency. In effect the free market (equities) is calling out the managed (debt) markets. Makes going in there and juicing equities seem rather odd actually. Small business creation still stinks, we'll never exit 2008 until we start normalizing rates. On the other hand....

Tue, 05/28/2013 - 12:13 | 3603825 buzzsaw99
buzzsaw99's picture

somebody call a waa bulance for gross

Tue, 05/28/2013 - 15:40 | 3604668 ParkAveFlasher
ParkAveFlasher's picture

omg.wtf kuroda y u no call me 2?  #PIMCO

Tue, 05/28/2013 - 12:16 | 3603836 ekm
ekm's picture

Any explanation that is not linked to ENERGY as far as Japan is concerned, is useless.


Japan needs energy, otherwise they'll be a 3rd world country.

What Abe/Kuroda are doing has to do with energy and they'll do anything.

Tue, 05/28/2013 - 12:20 | 3603859 fonzannoon
fonzannoon's picture

ekm see my response above.

Tue, 05/28/2013 - 12:18 | 3603844 RSloane
RSloane's picture

The only thing increasing in Japan is their debt load. The target of 2% inflation in two years after a decade of indifferent markets and a moribund economy makes about as much sense as spending a billion dollars on transfusions for Auntie Agatha who's been dead for ten years. Brilliant!

Tue, 05/28/2013 - 12:45 | 3603953 NipponMarketBlog
NipponMarketBlog's picture



Bernanke has dictated Japanese financial market conditions for years. The shoe is now on the other foot.

If only Japanese authorities could make up their minds about exactly what they want to have happen, and how....




And of course, during that time (which could be weeks or months) your lab operations will be ineffective.

Tue, 05/28/2013 - 13:04 | 3604071 RSloane
RSloane's picture

I've enjoyed reading your blog and will continue to do so. Thanks!

Tue, 05/28/2013 - 12:49 | 3603978 madbraz
madbraz's picture

Market had to be up for Bankia recap effort:



Tue, 05/28/2013 - 12:50 | 3603979 realtick
realtick's picture

Japan Drops Nuke On US Bond Market

Tue, 05/28/2013 - 12:57 | 3604031 Sutton
Sutton's picture


Tue, 05/28/2013 - 13:01 | 3604048 bonzo112358
bonzo112358's picture

But what has happened in Japan can't happen over here right?  Right?

Tue, 05/28/2013 - 13:06 | 3604086 RSloane
RSloane's picture

Oh gosh of course not. We're much smurter than they are.

Tue, 05/28/2013 - 13:05 | 3604080 Tio-CR
Tio-CR's picture

Pastor Lindsay Williams said that the Elite will blow the derivatives market by pushing up  rates....seems like pop corn time !!!

Tue, 05/28/2013 - 13:08 | 3604092 Yen Cross
Yen Cross's picture

     The T-10 chart is starting to look like the JGBs little step sister.

   U.S. 10-Year    2.131    2.011    2.133    2.025    0.121    [5.98%]   

Tue, 05/28/2013 - 13:09 | 3604098 youngman
youngman's picture

No one wanted our 2 years bonds sold today....wonder why????  rush to stocks on Tuesday i guess....20 Tuesdays in a row...this will be the big financial news this year...the Tuesday up run all year long....talk about a game

Tue, 05/28/2013 - 17:11 | 3605129 Flocking swans
Flocking swans's picture

JGB yielded a bigger influence on me than GD

Tue, 05/28/2013 - 18:16 | 3605395 WhiteNight123129
WhiteNight123129's picture

Relax and find another Job El-Erian, Bill you can retire quietly. The US Treasuries have just entered a multi decades bear market.


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