WTF Moment Of The Week: No One Bought Japanese Bonds For 36 Hours This Week

Tyler Durden's picture

Submitted by John Rubino via Dollar Collapse blog,

Here’s something you don’t see very often: For a day and a half this week, the Japanese government’s benchmark 10-year bonds attracted not a single successful private sector bid. At today’s artificially-depressed yields, no one wants this paper — except of course the Bank of Japan, which is buying up the bonds with newly-created yen. As the Gulf Times noted:

Japan bond market liquidity dries up as BoJ holding crosses ¥200tn

The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.

Data from the BoJ late on Monday showed its holding of Japanese government bonds topped ¥200tn ($1.96tn), or about 20% of outstanding issuance – up by more than half from ¥125tn about a year ago.


The fall in market liquidity looks set to intensify as the BoJ has vowed to continue its aggressive buying for at least another year, with market players expecting it to expand its easing some time later this year.


“Everybody thinks the market is not going to move for the time being because of the purchase by our dear customer, the BoJ,” said a trader at a major Japanese brokerage.


The BoJ stepped up its bond buying last April when Haruhiko Kuroda became its governor, vowing to take radical easing steps to end deflation once and for all.

The increasing dominance of the BoJ in the market, however, resulted in shortage of tradable bonds in the market, reducing trading flows between market players.

Brokers are reluctant to go short, fearing that they cannot buy back when they want. On the other hand, few investors are willing to chase prices higher, when the 10-year bonds yield about 0.6%


The upshot was that the average daily trading band of 10-year JGB futures price so far this month is 0.15, compared to about 0.50 in the 10-year US Treasury notes futures.


The current 10-year cash bonds saw its first trade of the week yesterday afternoon, having gone untraded for more than a day and a half.


Trade volume in the benchmark cash bonds so far this month dropped to less than one trillion yen, down about 70% from the same period last year.


In a sign that the BoJ is also worried about falling bond market liquidity, the central bank tweaked its JGB repo programme on Monday, saying it will offer to sell JGBs twice a day, compared to once a day now.


Yet traders shrugged off the measure as a drop in the ocean. And with the BoJ seen mopping up another ¥60tn-¥70tn of JGBs from the market, few investors are ready to pick up a fight.


“Everybody is holding off buying now only because they want to buy at a higher yield. But in the end, the only strategy you can take under an environment like this is buy more given the shortage of what you can buy,” said Takeo Okuhara, fund manager at Daiwa SB Investments.


One reason many investors are cautious about buying despite tight market conditions is the trauma of sharp reversal in the market rally after the BoJ adopted the current policy last April.


The 10-year JGB yield hit a record low of 0.315% on the following day after the BoJ’s easing, only to jump back to 1% about a month later – a scenario market players think can be repeated, given the fall in liquidity.


“I know this could end badly. But if you are in this market, you will have no choice but to buy,” Daiwa SB’s Okuhara said.

What exactly does this mean? Well, it’s definitely weird. These are the most important fixed income instruments of the world’s third biggest economy, and the only entity willing to own them is the government that issues them. The rest of the world now refuses to lend money for ten years at 0.6% to a government whose debt is 200% of GDP and rising, which leaves Tokyo with only two choices: monetize virtually all its future borrowing or allow interest rates to rise and pay two or three times as much in interest going forward. The latter choice would hobble, if not cripple, an economy that can only function when borrowed money is nearly free.

Here’s a brief interview with prominent Japan bear Kyle Bass noting the country’s “terrible” bond predicament.

In a world of markets rather than manipulations, this kind of imbalance would be an automatic short candidate. Actually, this kind of imbalance would never occur because it would be arbitraged out of existence long before it reached such an extreme. But today, when governments brazenly set prices for just about everything, there’s no reason why the Bank of Japan can’t simply decree a rate of zero or -1% or whatever it wants. As the trader notes at the end of the above article, this can’t end well. But exactly how and when it ends is anybody’s guess.

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fonestar's picture

It's okay... in the bizzaro world when nobody buys prices go up, up and to the moon!

Charles Nelson Reilly's picture

kinda like Bit........ ahhhh, forget it Fonestar, I'm not going to beat a dead cryto-currency

smlbizman's picture

did they call belgium yet....i hear they have tons of stupid fucking money, i mean currency....

DoChenRollingBearing's picture

Peru is still cranking out 165 tonnes yearly of real yellow money!  I ran into a note from Andina (Peru's press agency) recently, they had a picture of some gold doré bars...

Warning: gold porn

"Gold News and Pictures from Peru"

ZerOhead's picture

< Nice paper

< Rice paper


ZerOhead's picture

Nice papers made with rice papers...

Manthong's picture

If loving JGB’s is wrong, I don’t want to be right..

I might a hit song idea here..

Thought Processor's picture



This is the real news.  JGB's and Japan markets in general are wobbling.   


The Ukraine is a sideshow compared to this (and or is the side show on purpose as Japan devolves into instability).   


I think the clock is ticking on Japan now in earnest and I would expect the Ukraine fissure to ramp up in unison.



Keyser's picture

Not to worry, TPTB have figured out that they can monetize their debt to keep the wheels of "progress" turning, while hedging every market via derivatives or out-and-out manipulation. The Japanese should be a bit more coy in their actions, at least the US puts on the facade of having Belgium as a backstop. 


bustdrs's picture

Short JGBs is not called the widow maker for no reason.
Peoples have been saying this same shit for years and here we are, until we aren't.
Complacency with CB buying everything is the new new, who knew, just keep this show goings what the peoples want? No?

Ludwig Von's picture

Sorry, but we are only the parking for that currency. And besides that, we are to busy de-escalating that Putin versus Nuland decadent party. And our Dutch friends want to send their F-16 down there, but they need some spare parts, so we have to take our F-16 apart. It was a little hurt at that other party the US organised in Libya so you see, we are to busy to occupy on Japanese problems. 

Keyser's picture

You left out the international foo-pah about Kim Jong-Un's haircut... 


whatsinaname's picture

So does the Japanese Central Bank not own 100 % of the JGB market by now considering that they have been doing QE way longer than the US ?


youngman's picture

The rest is owned by the Japanese Pension funds...good for they have a lot of older people...gonna need those yen..and some yang

pods's picture

Japanese central bankers are praying that Godzilla wakes his ass up and breaks some stuff to take some heat off of them.



sodbuster's picture

It's just another rigged, faux market- propped up with fake, fiat money- just like the US markets.

Keyser's picture

So, when Japan goes tits-up, who is going to look after that small matter of freaking nuclear reactors melting through the center of the earth in Fukushima?


Kobe Beef's picture

Look, this being Easter and all, I'm gonna get real deep and talk about the Secret Destiny of Mankind, which as we speak, has been fulfilled.

Humans are not the pinnacle of evolution. We are in fact just smart enough and stupid enough to enable its next phase. You see, God made mankind to do two things: 1) make plastic out of geologic hydrocarbons and dump them in the ocean, and 2) mine, concentrate, then lose control of radioactive isotopes and dump them in the ocean.

I refer you to Genesis 3:11 which clearly states, "Go forth and do incredibly stupid things with dangerous materials so that thou might acquire exquisitely-printed paper tickets. This I command thee, my idiot children".

Now these volatile elements striring about the ocean in vast radioactive garbage patches can evolve into God's long-desired Plastic-Based Life.

Why did God do this? Because he wanted to make a higher lifeform and had billions of years to design a Rube Goldberg system to do it, which included the High Comedy of involving semi-sentient apes in the process. Sure he could have done it all in one day, but he's God, and he needed a challenge and a good laugh.

Mission accomplished. Good night, mammals. The Plasticocene Ere is upon us. Thy will be done.

firstdivision's picture

L. O. Fucking. L.  Nothing like having only the support of your own CB to fund your debt by buying your debt.  Have no fear, the US isn't far behind.

caustixoid's picture

An incompetent CB at that, leaving bonds unbid for even a second.  Someone better be seppeku'ing.  There's a danger that people might wake up.  It's like letting Toto run around Oz's castle pulling at curtains.

NOTaREALmerican's picture

Dude,  have you checked the weather in Japan lately?

TheRideNeverEnds's picture

Yea, its 61 and cloudy with a 98% chance of moar QE.  

CrashisOptimistic's picture


Money is an invented substance.  If you don't like what money numbers on a screen say because they mean millions are about to die, you just change them by decree.

There are no markets.  HFT dominates all trading.  Why would you participate in this?

Farmland beckons.  When trucks can't fill your grocery store shelves, the man with crops hires neighbors to harvest them, and pays them in crops.

DoChenRollingBearing's picture

During parts of the Dark Ages (say from 800 - 1300) there were Viking predations upon parts of W Europe.  Typically they stole all of the money (gold and silver).  My understanding is that this left those areas without money, but crops intact, much poorer than before (above and beyond burned homes, etc.).

I believe that even "money", fictional and difficult as it is to grasp and define really DOES make a difference.  Lack of money, circulating money, helped keep Europe down.


I do completely agree with all of your comments on the critical nature of our lack of good energy and those consequences, Crash.

fonzannoon's picture

meanwhile commodities....(except the one true inflation hedge that has been around for 5,000 years....)

CrashisOptimistic's picture

You must mean oil.  It's been around for 79,995,000 more years than that.

DoChenRollingBearing's picture

But, oil and other energy is hard for people to store.  And those of us who cannot farm, far our various reasons, have few options other than turning to gold and however else we can prepare.

CrashisOptimistic's picture

No question lots of people live a long way from farmland.

They live a long way from Wall Street, too.

A few years ago about 1/4 of Google engineers bought up lots of Iowa farmland and did deals with the local farmers to farm it and split the crops.

Now when the time comes, it's a tough call to know if those Google folks could somehow get to their farmland -- and would their tenant farmers let them on the land when they walked in, gaunt and with shoe soles flopping off of the shoe -- but their odds would be better than if they held shares of stock in vacant Google buildings, empty because everyone is out looking for the food the trucks didn't deliver.

I will grant you a single reason to think gold means anything.  It is possible . . . just outside possible, you could bribe your way past the Brazil border guards with it when the time comes, and thereby get yourself into a country that has three growing seasons per year. 

They may let you in.  They'll need more people to pull the plows.


DoChenRollingBearing's picture

I don't speak Portuguese, so my choice would be with my in-laws in Peru.  Maybe we can sell bearings to anyone still running machines...

Peru has some oil & gas.  And if the international demand would raise dometic prices too high, then .gov del Peru would slam that export window shut.

fxrxexexdxoxmx's picture

I Bitcoins have the possibility of working that way.

The Axe's picture

I got  ten NO twenty WTF moments this week

Two-bits's picture

This is the part where the head has been severed but the body doesn't know it is dead yet.


Or, they are using the Rockafeller addage, "Competition is a sin".


Either way, Fuck Mr. Yellen.

Edit:  So what Kyle is saying in the last paragraph is that BoJ can drop interest rates on the 10yr to -1% and they would buy debt and eliminate it at the same time?  This is a mobius strip kind of deal yes?

The Axe's picture

Including you about to see...the 3:30 dump  instead of 3:30 pump   

Two-bits's picture

Spot fucking on!!!  IS that you Janet?

NoDebt's picture

"I know this could end badly.  But if you are in this market, you will have no choice but to buy"

I generally avoid markets where I have 'no choice' due to somebody else's predicament.

pods's picture

That is what made me chuckle.  Evidently, most have decided that there is a choice.


semperfi's picture


Let's call it what it really is:  Iron Fisted Central Absolute Control - Full Financial-Economic Spectrum Dominance

NoDebt's picture

I dunno.  That doesn't exactly roll right off the tongue.

How about IFCAC-FFESD?

Inthemix96's picture

Public hanging could be the answer to all this jazz like.

Wake me up when no fucker buys this shit.

As 'Laws' says, roll the mother fucking guilotines, NOTHING, nothing at all changes till.


Skateboarder's picture

Guillotine parts made in China, assembled in Korea, shipped to Amazon warehouse in Kentucky, paid for with clownbux and shipped to me in Cali to be freshly rolled out on to the street. I wonder if it comes with a free iPad.

Inthemix96's picture

I wonder if DoChen suppiles the bearings for the recoil pull Skateboarder?

Well played in any case my friend....


Skateboarder's picture

That would certainly complete the circle won't it? 8-)

As much as I love the idea of Deus ex Machina guillotines saving the day as you and LoP do, I think we are long past the age of justice.

They have f**king lazers to slice a human in half like a hot knife through butta'...

Inthemix96's picture

That is right and may be so my friend.

But some fucker has to turn up and switch it on and operate it Skateboarder, and I would hazard a guess, he/she, has family, friends, neighbours, you know the score, and at this point mate.

So do they.  Odds on, they must know how we as a collective feel, the anger, the indignation of being 'Used As Pawns'.

Their time is almost out, I cant just feel, smell, hear, and see their desperation, I can and do sense it.

If you know what I mean?  We will be alright my friend, there are far to many of us for them to something with.

We are legion, even you and me.


Skateboarder's picture

Thank you for your [comforting] words itm. The extent of the development of the killing machine is troublesome, but every machine needs an operator as you say. How they exploit the weaknesses of our ecosystem, will come back to bite them in the ass as the strengths they are so afraid of.

Gotta stick together, deliver the hits as one.

CrashisOptimistic's picture

Guilotines have a much higher bar to get over than sniper rifles.

Spungo's picture

BOJ = retards. If your target inflation is 2%, why the hell would anyone buy your bond for less than 2%?