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Mizuho Warns "To All Intents And Purposes, There Is No Japanese Bond Market Anymore"

Tyler Durden's picture





 

Just as the European 'markets' have entirely disconnected from fundamental reality, Japan's bond market - the largest in the world - "is dead, with only the BoJ driving prices," Mizuho warns. Crucially, once again just as in Europe, "these low yields are responsible for the lack of fiscal reform in the face of Japan’s worsening finances. Policy makers think they can keep borrowing without problems." Market functions are sacrificed for the sake of ending deflation, but "liquidity has evaporated as the BOJ has gobbled up most of the market." This means that a reduction in monetary stimulus could cause a rapid drop in bond prices, which, just as in the US, "will make it difficult for the BOJ to normalize policy." Simply put, as Bloomberg notes, the BoJ has killed the nation’s sovereign bond market, leaving it unable to reflect either the success of stimulus policies or fiscal risks.

 

Via Bloomberg,

...

 

Monthly trading of Japanese government bonds among the biggest holders including banks and insurers shrank to 37.9 trillion yen ($385 billion) last quarter, the least on record going back to 2004, according to Japan Securities Dealers Association data.

 

...

 

The JGB market is dead with only the BOJ driving bond prices,” said Tetsuya Miura, the chief bond strategist at Tokyo-based Mizuho, one of the 23 primary dealers obliged to bid at government auctions. “These low yields are responsible for the lack of fiscal reform in the face of Japan’s worsening finances. Policy makers think they can keep borrowing without problems.”

 

...

 

Japan’s government has yet to present detailed proposals on how to consolidate its finances, the International Monetary Fund said last month.

 

...

 

The central bank said last week the country is on track to hit its 2 percent inflation target. Prices excluding fresh food are projected to rise 1.3 percent in the year from April, the BOJ expects, after accounting for the effect of the sales-tax increase.

 

Higher costs of living typically erode real yields, or what bondholders earn after inflation, damping the appeal of the currency needed to buy them. The difference between 10-year JGB yields and the most recent inflation rate in Tokyo was about 0.3 percentage point, near the lowest since December 2008.

 

...

 

“The BOJ’s priority is to lower Japan’s real interest rates and ensure an end to deflation, even if they have to sacrifice liquidity and trading volumes in the bond market,

 

...

 

Market functions are sacrificed for the sake of ending deflation,” said Izuru Kato, the Tokyo-based president of Totan, a research unit of money-market broker Tokyo Tanshi Co. A reduction in monetary stimulus could cause a drop in bond prices, which “will make it difficult for the BOJ to normalize policy,” he said.

 

Such a risk has already been seen in the U.S.,

 

...

 

“Liquidity has evaporated as the BOJ has gobbled up most of the market,” Nicholas Spiro, the London-based managing director of Spiro Sovereign Strategy, wrote in an e-mail. “To all intents and purposes, there is no JGB market.”

 


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Tue, 11/05/2013 - 22:29 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Oh, there's a free market and it's alive and well.  But it's a free lunch market for the oligarchs.  For the rest of us, it's serfdom as our governments print away our future and turn today's cash for the ruling class (most of whom exist in the shadows and have titles like Lord or Prince and who spend their days playing Polo or attending parties as they have for generations) into our future generational debt to be repaid with labor.  Meanwhile, we argue about which party should send our money to them.

Tue, 11/05/2013 - 22:44 | Link to Comment Harbanger
Harbanger's picture

"For the rest of us, it's serfdom as our governments print away our future and turn today's cash for the ruling class"

No. It's not for the "rich".  They're creating new currency to sustain the unsustainable progressive government system, dipshit.  Class warfare is so worn out.

Tue, 11/05/2013 - 23:18 | Link to Comment LetThemEatRand
LetThemEatRand's picture

How do you define rich, asshat self-upper who always gets an upvote within seconds of each post?*  I define it by people who haven't worked in generations and whose names you don't know.  You are against "class warfare" because Rush taught you that it means the free shit army versus the "productive class."  That's not what I'm talking about.

They are keeping the EBT crowd happy to avoid revolution, not to sustain an ideology.

*I see below that you stopped upvoting yourself within seconds.  That's a start to understanding that being part of the herd is not a good thing.

Tue, 11/05/2013 - 23:22 | Link to Comment Harbanger
Harbanger's picture

We are already living under a centrally planned statist system, my dipshit lolita friend.  You know a true revolution will not come from the EBT crowd.

Tue, 11/05/2013 - 23:25 | Link to Comment LetThemEatRand
LetThemEatRand's picture

"You know a true revolution will not come from the EBT crowd."

Wrong.  The EBT crowd is well armed and already knows there is no justice for the likes of them.  They are a powder keg held back by Obama phones and EBT cards.  The kind of revolution they will start if the free shit is taken away (it will be) is the very kind TPTB want.  Poor versus middle and upper-middle class.  You know, the kind of war you have been taught by your propagandists is the inevitable one that some Red Team guy is going to protect you from and that requires militarized police.  I see it coming because they want it to happen to distract the likes of you.

Tue, 11/05/2013 - 23:29 | Link to Comment Harbanger
Harbanger's picture

If the "revolution" is expect like TPTB want, you know it's not real but orchestrated, right dipshit.  Because when a true rev strikes you will be that last to know. Right dipshit?  I'll give you a heads up after it happens.

Tue, 11/05/2013 - 23:36 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Thanks for schooling me with your brilliant commentary.  And you don't need to give me the heads up.  I'll moniter Rush.

Tue, 11/05/2013 - 23:41 | Link to Comment Harbanger
Harbanger's picture

Rush is your problem? you team player fag.  You're banking on the EBT crowd creating change, I'm banking on the disenfranchised middle creating change.  Is that so hard to understand?

Wed, 11/06/2013 - 00:01 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Okay, I'll lay off because it's obvious I've gotten to you.

But it's not about who is right and who is wrong, or arguing between us to try to win.

Next time you listen to Rush think about whether listening to him and believing what he says has improved your station in life, or merely given you a false boogie man to blame.   Most Rush listeners I know have lost ground the last couple of decades.  Rush teaches blame and hatred towards his fellow Americans.  To him, the blame lies at home and he never mentions the guys who fund his favored candidates.  And what has voting Red Team gotten you?  I freely admit that I was a victim to the same thing.  I was wrong and blame myself for being suckered in by the major political parties and believing they are different.  

Last word to you.

Wed, 11/06/2013 - 00:01 | Link to Comment Manthong
Manthong's picture

It's a bit more efficient to use the short sword to gouge one's own bowels out.

I have some spares for those bankers who are in deficit.

Wed, 11/06/2013 - 00:28 | Link to Comment markmotive
markmotive's picture

Japan is f@cked. THIS is what the beginning of the end looks like.

Kyle Bass: "The beginning of the end," is here for Japanese government bonds

http://www.planbeconomics.com/2013/04/kyle-bass-beginning-of-end-is-here...

Wed, 11/06/2013 - 00:19 | Link to Comment Harbanger
Harbanger's picture

"Last word to you."

Never last word, I know you by now lola.

I argue with you about ideology, but you're stuck in political parties cause you have your own little mind agenda.  You defend critisicsm of American progressive democrats in power who are known Statists.  Why? I don't know what you think you will gain. Nothing of real value, I'm sure.  You always revert to class warfare, it's old hat, the country is broke, what you're seeing is the failure of central planning, the rest of the world is moving forward regardless.

Wed, 11/06/2013 - 07:20 | Link to Comment gatorengineer
gatorengineer's picture

Rand -What would possibly make the EBT crowd rise up?.  They are very very comfortable.  If you say when the EBT cards stop working then you have made Harbangers point for him....  The tree is rotting from the inside and out.....

Wed, 11/06/2013 - 01:12 | Link to Comment Radical Marijuana
Radical Marijuana's picture

 

I thought your comment was cute, LetThemEatRand, I thought it was witty to say there IS a free lunch market for the oligarchs! However, the world has become so hyper-complicated now, that there is no beginning or end to been seen or analyzed. As already featured twice on Zero Hedge:

http://www.youtube.com/watch?v=kFQJNeQDDHA

The Wall Street Code (Marije Meerman, VPRO)

...After watching that documentary through,
my favourite moment was at 47 minute mark.

Dave Lauer: THESE ARE COMPLEX SYSTEMS!

So, talking about "causation" becomes NONSENSE ...

"I don't think anyone understands what's going on."

As far as "who" is now to blame, I repeat for the nth time what I feel is one of most important concepts to try to grasp about today's totally mixed up world, where nobody and/or everybody CAUSES everything and/or nothing:

There is an ouroboros of incorporated robbery: a growing feedback loop of organizations which have been mandated and powered by governments owning the vast majority of the corporations that those governments originally chartered, and were supposed to be regulating. The current trends are for an incestuous system of professional money managers going through revolving doors between corporations and governments, controlling the governments, that own the corporations, that control those governments ... http://www.cafr1.com/ ... the biggest companies surely follow the pattern to be found in over a hundred thousand American CAFRs, that the majority of the shares of publicly traded companies are collectively owned by entities which got their power to buy them from government. It is like a fire breathing dragon, twirling around faster and faster, chasing its own tail!

THAT is what has become of Harbanger's "centrally planned statist system."

Wed, 11/06/2013 - 01:59 | Link to Comment Harbanger
Harbanger's picture

Great post Rad.

Tue, 11/05/2013 - 23:19 | Link to Comment Leveraged Algorithm
Leveraged Algorithm's picture

Kyle Bass should be having an orgasm by now.....

Tue, 11/05/2013 - 23:21 | Link to Comment fonzannoon
fonzannoon's picture

i think u mean a stroke

Tue, 11/05/2013 - 22:29 | Link to Comment fonzannoon
fonzannoon's picture

 "This means that a reduction in monetary stimulus could cause a rapid drop in bond prices"

Ho Le Fuk

Sum Ting Wong

Give it up with this reduction in policy crap. Japan has blown their debt out of their own ass and is basically borrowing for free. 

Take note of this. Their bond market is fully owned and without a currency collapse. 

Tue, 11/05/2013 - 22:32 | Link to Comment LetThemEatRand
LetThemEatRand's picture

There's no currency collapse because the people who are receiving the spoils are stashing away the loot.  The middle class is shrinking because there is an ever decreasing pie in the general economy, which is no surprise given that all of the wealth is being transferred outside that economy.  When they're ready, it will be hell to pay.

Tue, 11/05/2013 - 22:35 | Link to Comment fonzannoon
fonzannoon's picture

Maybe, but if you pull the plug on Japan you are pulling the plug on the whole thing. So wy pull the plug at all?

Tue, 11/05/2013 - 22:39 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Same reason we had WWI and WWII.  We are reaching a point where the sheeple are getting restless.  The rulers know that the only way to distract the population is a major reset that appears to come from external powers beyond their control.  We didn't have WMDs in the first big wars.

Tue, 11/05/2013 - 22:46 | Link to Comment fonzannoon
fonzannoon's picture

I hear you but I don't see it man. Not right now. I see Diblasio just won in NYC. So he will take care of the sheeples and the banks will fund it. I am not saying things won't ultimately end pretty badly. I am just wondering if we are a long ways away.

Tue, 11/05/2013 - 22:50 | Link to Comment LetThemEatRand
LetThemEatRand's picture

I couldn't agree more.  Could happen tomorrow or 30 years from now.  Who knows how long they can keep this game going.  One thing is certain in my mind -- when it happens, we won't see it coming and it will happen all at once.  Like Pearl Harbor, the 1929 crash, 9/11, etc.

Tue, 11/05/2013 - 22:55 | Link to Comment fonzannoon
fonzannoon's picture

Agreed man. I just think it will happen on an individual basis. 

Tue, 11/05/2013 - 22:57 | Link to Comment Dr. Engali
Dr. Engali's picture

I don't think it will be thirty years. I'll be willing to bet there is a major war within the next five year. Like you said the sheep are getting restless. We haven't seen anything yet. Wait until they really start to crack up.

Wed, 11/06/2013 - 00:12 | Link to Comment Thought Processor
Thought Processor's picture

My Guess:  2-3 years max.  

Things are speeding up now.  If you look at the rate of debt accumulation, it has long since gone parabolic.

There will likely be increased volatility (as the central banks begin to lose control) and then increased civil unrest globally followed by a very brutal but relatively short nuclear world war.

Then the big reset.  To a different monetary regime, though this may take a couple tries to get right (with all the discussion and fighting that goes along with that).   

Japan heads off the plank first.  Others speed up there after. 

Wed, 11/06/2013 - 18:56 | Link to Comment pitchpole
pitchpole's picture

It will be when they decide it to be.

This book (free) written in 1971 explains much and is well worth the read.

http://www.ldsfreedomnetwork.com/none-dare-call-it-conspiracy.pdf

 

Wed, 11/06/2013 - 07:23 | Link to Comment gatorengineer
gatorengineer's picture

By your vary post you see it comming.....

Tue, 11/05/2013 - 23:04 | Link to Comment Harbanger
Harbanger's picture

No. WWI began shortly after progressive Pres. Wilson created THE FED in 1913, a central banking system owned by globalists.  They don't care for US laws, they own the politicians.  They introduced the fractional reserve system of expanding the welfare state.  All based upon the endless expansion of national debt and wars.

Tue, 11/05/2013 - 23:08 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Yes, it's all Progressives' fault.  Nice simple(ton) view of history.  There were no wars before the welfare state and free elections.  Kings and Queens never initiated conflict to serve their own avarice until Progressives came on the scene.

Tue, 11/05/2013 - 22:36 | Link to Comment prains
prains's picture

Japan's a cancerous nuclear wasteland within one generation, their bond market is like crying over melting ice cream in the freezer at this point

Tue, 11/05/2013 - 22:46 | Link to Comment LetThemEatRand
LetThemEatRand's picture

The last time Japan was in such a dire condition there was war.  No one in the 1930's saw WWII coming.   I'm not saying Japan is going to start a war, but they are part of a much larger puzzle.  The Russians are moving major military firepower into the Middle East, shortly after giving asylum to a guy whose revelations seriously eroded the confidence of our NATO allies in the intentions of the USA.  Meanwhile, the USA is openly monetizing the debt that underlies the world reserve currency and that is held in large amounts by the likes of China and Japan and Saudi Arabia.  Wonder why.

Tue, 11/05/2013 - 22:57 | Link to Comment prains
prains's picture

Don't worry the MIC has it ALL under control, LOL!

Tue, 11/05/2013 - 22:52 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

I need to sell my house; pronto. Think I'll make myself an offer well over asking price and accept the offer. I'll be rich!!

Tue, 11/05/2013 - 22:29 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

IMHO, people should avoid all bonds now.

Buy hard assets.

***

While we have our kid pretty much fixed up (she has a good job, no student debt, etc.), I really wonder about any children she may have.  What future awaits the USSA?

Tue, 11/05/2013 - 23:15 | Link to Comment seek
seek's picture

The future will be very bright for anyone that emerges from the bomb shelters. For the rest, no so much.

Mine is in her first year of college, and I regret that she couldn't live in better times and have something to look forward to when she graduates.

Tue, 11/05/2013 - 23:55 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Ours graduated in 2009, a crappy year for a Liberal Arts grad.  But, she found work on her own in a different city, then found better work after.

Your daughter will likely do just as well or better if she has the smarts of her old man...  

:)

***

I do the worrying in my family.  That allows my wife and daughter to live slightly more blissful lives.

 

Tue, 11/05/2013 - 22:31 | Link to Comment Oldwood
Oldwood's picture

What is this term "market"?

Tue, 11/05/2013 - 22:56 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

It's nothing you need to concern yourself over. Just keep tabs on the level of the DOW or whatever other stock metric that is your measure of the economy's health and rejoice in its incredible numerical increase. Regards, Ben.

Tue, 11/05/2013 - 23:01 | Link to Comment Oldwood
Oldwood's picture

Blue skys.... forever? Promise?

Wed, 11/06/2013 - 02:13 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

I can't promise you anything but I can offer you hope. 

Ben

Tue, 11/05/2013 - 22:34 | Link to Comment arkel
arkel's picture

Coming to a country near you.  

Tue, 11/05/2013 - 22:36 | Link to Comment ebworthen
ebworthen's picture

The U.S. bond market is just as dead.

Rather than having older generations get paid 8% for buying Treasuries they get next to nothing and the FED buys them instead - on the backs of their grandchildren.

Tue, 11/05/2013 - 22:44 | Link to Comment Bunga Bunga
Bunga Bunga's picture

It's not just Japan. Central banks in most countries are driving the ride nowadays. In other words: only the central banks can screw it up. Tapering is a no-go forever.

Tue, 11/05/2013 - 22:58 | Link to Comment Dr. Engali
Dr. Engali's picture

Wtf? No fucking shit captain obvious . It took you this long to figure this out? The next thing you know they'll try to tell us is that the federal reserve will be monetizing debt.

Tue, 11/05/2013 - 23:16 | Link to Comment q99x2
q99x2's picture

Maybe if everyone, except Greece, prints (it can't), nobody will notice.

Well there you have it: the member banks of the Central Banks will own everything.

That's just a swell solution to life on this planet.

Tue, 11/05/2013 - 23:34 | Link to Comment yogibear
yogibear's picture

Ping-Pong Ponzi.

Japan with it's printed fiat buys US debt while the US buys Japanese debt with printed money and so on.

Every country's central bank  buys each others debt with printed money. 

Wed, 11/06/2013 - 00:29 | Link to Comment Sizzurp
Sizzurp's picture

I think Kyle is right, Japan is nearing the brink and will be the first to go.  It will happen when a critical mass of folks have finally had enough and bail out of those bonds. The event horizon will grow and slirp down a few big players as the derivative chain comes unglued.  The CDS's will go parabolic. It will be fun to watch the central bankers reach full spin mode as they attempt to beguile the panicked markets.

Wed, 11/06/2013 - 02:16 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Investing folks or mum and dad Wantanabe?

Wed, 11/06/2013 - 11:50 | Link to Comment Non Passaran
Non Passaran's picture

In theory, yes, in practice the BoJ can keep doing this for quite a while... 

It seems to me my PM-related cost-down averaging will be going on for few more years...

Wed, 11/06/2013 - 02:19 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

more real 'news' .... yet all I read in Barrons and Bloomberg and 'news' media is how stupid Ted Cruz is and the Tea Party is the new George W Bush (to blame for everything) and Rand Paul is a plagiarist and ... the Affordable Care Act is not that big a deal and everyone against it must ultimately be a racist.

yeah, I'm the fool to pay for such 'insightful' "analysis" and profound intellectual commentary.   yet day after day, actual information and insightful analysis is glossed over, ignored or even mocked.   Folks, if you were in England, the news media elites absolutely mock Nigel Farage ............ because they are terrified that his message will wake up more ....

look around ....... look in the mirror even ..... .this is what has brought the West to this juncture ..... where the 'primaries' in Japan publicly state that effectively there no longer is any market.

Are you happy now Warren Buffett and George Soros?  how much money do you really need to feel the ultimate power?   you can hire your own personal armies Russian style (maybe they already have them) but for the rest of us - when the valves of the western capital markets start to blow ... what are we to do? 

 

Wed, 11/06/2013 - 02:24 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

Bloomburst had to report this since it was MiZuho ........ and I'll bet some editor wanted to 'tame' it down

Wed, 11/06/2013 - 10:18 | Link to Comment NipponMarketBlog
NipponMarketBlog's picture

 

 

For a look at the way in which JGB trading volume has slumped, which in turn signals investor apathy, please see this:

http://nipponmarketblog.wordpress.com/2013/11/06/the-japanese-bond-marke...

Wed, 11/06/2013 - 11:00 | Link to Comment d edwards
d edwards's picture

How is the USSA any different? Seems like the only party buy our debt is the Fed.

Wed, 11/06/2013 - 11:00 | Link to Comment d edwards
d edwards's picture

How is the USSA any different? Seems like the only party buy our debt is the Fed.

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