• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Japanese Bond Futures Volume Collapses To Zero Even As Service Sector Implodes

Tyler Durden's picture


You know things have got a little too strange when the largest government bond market in the world saw no futures trades in the morning session last night. We may complain in the US of falling volumes but none, zero, zip, nada is about as low as it gets; and that is how many trades occurred in the 20Y futures contract in Japan (and 10Y cash bond market). This is not the first time as Mizuho warned in Nov 2013 that "to all intents and purposes, there is no JGB market." And this lack of trading on a day when major macro data printed far worse than expected... well played Abe... you entirely broke your bond market.

As Bloomberg reports, 10yr cash bond and 20-year bond futures were untraded in themorning session (Japan’s benchmark 10-yr note had no trade all day on April 14; that was the first time since Dec. 2000)

And this total lack of trading occurred on a day when Japan's Services sector data collapsed 5.4% (considerably worse than expected) as the post-tax-hike hangover hit like a Tsunami...

It seems Mizuho's warnings were all too real...

“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.”


"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.


"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.”

Well played Abe, well played...

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Tue, 06/10/2014 - 11:27 | 4840656 maskone909
maskone909's picture

not to worry, goldman is putting togather a reeeeal nice algo to drive up that volume.  dont worry pesants, everything is a-o-k

Tue, 06/10/2014 - 11:30 | 4840673 Terminus C
Terminus C's picture

If I understand this correctly, the Japanese gov't owns all of its own bonds and they ain't sellin'.

Algo's can't do anything if there is nothing to buy and sell.

Tue, 06/10/2014 - 11:34 | 4840697 This just in
This just in's picture

Please do not worry.

Tue, 06/10/2014 - 11:37 | 4840711 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I am sure Zimbabwe is proud!

Tue, 06/10/2014 - 11:41 | 4840731 NoDebt
NoDebt's picture

I've been around here a while, not much makes be pause any more.  But that's just downright creepy right there.

Tue, 06/10/2014 - 11:42 | 4840734 Aaaarghh
Aaaarghh's picture

something just has to give soon! ffs...

Tue, 06/10/2014 - 12:23 | 4840892 disabledvet
disabledvet's picture

Yen and euro...nuked simultaneously.

Tue, 06/10/2014 - 11:38 | 4840718 john39
john39's picture

clearly the japanese central bank needs to create a few spin off entities that can buy and sell bonds back and forth to each other.  you know, like Belgium does for the U.S.  problem solved.

Tue, 06/10/2014 - 11:31 | 4840678 Cangaroo.TNT
Cangaroo.TNT's picture

Right?  You would think they'd at least pocket swap to create the illusion of a market.

Tue, 06/10/2014 - 11:32 | 4840686 maskone909
maskone909's picture

Fuck her right in the pussy.

Tue, 06/10/2014 - 11:35 | 4840700 Itchy and Scratchy
Itchy and Scratchy's picture

....as opposed to?

Tue, 06/10/2014 - 11:36 | 4840707 maskone909
maskone909's picture

as opposed to anything the msm reports



Tue, 06/10/2014 - 11:29 | 4840669 NoWayJose
NoWayJose's picture

When there is no 'market' it means that the things the market is supposed to be trading are on their way to be worthless.

Tue, 06/10/2014 - 11:30 | 4840670 IronShield
IronShield's picture

Perhaps Ms. Watanabe is starting to favor the shiny instead.  Well played Ms. Watanabe, well played.

Tue, 06/10/2014 - 11:31 | 4840675 kliguy38
kliguy38's picture

We don't need no stinkin' bonds!!!

Tue, 06/10/2014 - 11:30 | 4840676 q99x2
q99x2's picture

Japanese transmissions were never as good as their engines. Put a little sawdust in er and she'll make it up the hill.

Tue, 06/10/2014 - 11:31 | 4840680 Dr. Engali
Dr. Engali's picture

The japanese bond market is dead and we are headed there too. Thank God for tremendous demand from Belgium.

Tue, 06/10/2014 - 11:35 | 4840702 Winston Churchill
Winston Churchill's picture

Its Zaire this month Doc.Or is it Monaco.

Anyways foreigners.Cough cough

Tue, 06/10/2014 - 11:38 | 4840716 yogibear
yogibear's picture

Yep. The US Federal Reserve with it's bond buying desk in Belgium can buy all the bonds it wants but it cannot fix the problem in a debt zombieland.

Tue, 06/10/2014 - 11:52 | 4840771 Thought Processor
Thought Processor's picture


FED masking purchases thru Belgium in order to continue the faux "Taper" at home- Check.

Japan with ZERO demand for it's own debt - Check.

Europe in the economic deadzone - Check.


All we need now is WWIII for the Reset.  


But then they're still working on that one............

Tue, 06/10/2014 - 12:01 | 4840805 Quinvarius
Quinvarius's picture

China and Russia decided to win by just sitting back and watching odipshit destroy the USA for them.  So if the bankers want an actual war, they need to think local.  They should probably attack Canada.  It is full of white people.  Odipshit is game for that.

Tue, 06/10/2014 - 13:30 | 4841162 SDShack
SDShack's picture

Civil War is the plan, and it is pretty obvious who the target country is. All the internal security dominos are being lined up for just one thing....

Tue, 06/10/2014 - 13:38 | 4841196 SDShack
SDShack's picture

Japan's time has passed. They were useful to the world after WWII because they had a compliant educated population, that worked cheap and could be trained to make fantastic quality products that the world consumer wanted. But they had no raw materials, so they were only good as a labor/manufacturing supply point. Fast forward 20 years, and Indonesia, Taiwan, South Korea, China, and now India are the Japan of 40 years ago. Japan's fate was sealed by Fukishima. The investment money will never flow there again because the sociopaths know the demographics work against them.

Tue, 06/10/2014 - 11:32 | 4840684 orangegeek
orangegeek's picture

print money, buy bonds at rates that are far below reality, crush volatility, crush volume.


good job Yellen.


what's next?  more jobs lost due to a failing industry.


good job Yellen on this front too.


so how are funds making it now?  shorting derivates of volatility (they've moved past equity derivates).


we are on the edge of the edge of the edge.....

Tue, 06/10/2014 - 11:34 | 4840691 the not so migh...
the not so mighty maximiza's picture

broken bond markets...o yeah i forgot, thats bullish

Tue, 06/10/2014 - 11:34 | 4840694 Itchy and Scratchy
Itchy and Scratchy's picture

Volume preceeds price.

Tue, 06/10/2014 - 11:40 | 4840722 Soul Glow
Soul Glow's picture

Supply/Demand metric; find price at P*.

But can we calculate this without any demand?

Tue, 06/10/2014 - 11:34 | 4840696 Saratoga
Saratoga's picture

Just call Belgium they will help them out.

Tue, 06/10/2014 - 11:35 | 4840701 yogibear
yogibear's picture

Japan is the US Federal Reserve's grand Keynesian printing experiment. First they implode, then the US with it's enormous debt.

Japan is the canary in the debt coal mine.  

Tue, 06/10/2014 - 11:39 | 4840703 Soul Glow
Soul Glow's picture

Get to work Yellen!  Demand has evaporated!

Tue, 06/10/2014 - 11:36 | 4840710 youngman
youngman's picture

I think they are not the only fake market out there...seems to me there are others..

Tue, 06/10/2014 - 11:37 | 4840713 Aaaarghh
Aaaarghh's picture

please let it all end.....PLEASE!!!!! ive had enough now. How long can this go on for? jeez..

Tue, 06/10/2014 - 11:40 | 4840723 Haus-Targaryen
Haus-Targaryen's picture

I'm thinking another 3-4 years.  This is the last big credit bubble.  I don't see how the big 4 can come back from when this explodes.  Even if the USD/BOE/ECB went full Japan, what would Japan do?

The end is near.  Although I am surprised its lasted as long as it has.

Tue, 06/10/2014 - 11:45 | 4840740 Soul Glow
Soul Glow's picture

Oil production appears to be falling.  If oil supply falls and demand stays high (due to easy credit) price will jump, thus killing descretionary spending and GDP.  

That is where it ends.

Tue, 06/10/2014 - 12:05 | 4840821 Thought Processor
Thought Processor's picture


Very true.


Fracking was always a stop gap to ensure the US economy would not implode in the mid 2000's.  

We're reaching the end of the stop gap now.  

War is coming.  Because the alternatives would threaten the current status quo.

Tue, 06/10/2014 - 11:41 | 4840729 yogibear
yogibear's picture

The US Federal Reserve's slow grind downward can last for a long time. Adding more and more debt and saturating every crevice. 

Tue, 06/10/2014 - 11:39 | 4840721 suteibu
suteibu's picture

Stop picking on Abe.  All of the geniuses at the BIS, IMF, OECD, et al, have given Abenomics its full support.  If anything, they all want the consumption tax hiked to 20%.  Whats a simple-minded kachuu to do?

Tue, 06/10/2014 - 11:40 | 4840725 Itchy and Scratchy
Itchy and Scratchy's picture

Gee.....and I had my eye on those 20Y .00000000000001% yielders too! Who wudda thunk?

Tue, 06/10/2014 - 11:41 | 4840730 tuttisaluti
tuttisaluti's picture

The us buy bonds from japan, japan buys bonds from the eu, the eu from uk, the uk from us and so on.

And all of them are broke. Where does all the money come from?

Tue, 06/10/2014 - 11:43 | 4840736 yogibear
yogibear's picture

Non-productive. One huge Federal Reserve  circle-jerk debt ponzi scheme. 

Tue, 06/10/2014 - 11:55 | 4840782 buzzsaw99
buzzsaw99's picture

mu mu mu mu my kuroda

Tue, 06/10/2014 - 11:55 | 4840785 gengc
gengc's picture

I thought that is scary that nobody is buying JCB bonds and that is the start of the end game. 

Tue, 06/10/2014 - 12:03 | 4840812 Callz d Ballz
Callz d Ballz's picture

“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.”


Tue, 06/10/2014 - 12:38 | 4840954 ThroxxOfVron
ThroxxOfVron's picture

As long as the Primary Dealers are obliged to bid on Bond Auctions the 'Policy Makers' CAN 'keep borrowing'.  Problems?  The Electorate are the problems and those problems can be dealt with as long as the Auctions ARE bid by the Primary Dealers.

You WILL KNOW that TSHTF the moment that the Primary Dealers cry Force Majeur and DO NOT BID.

Tue, 06/10/2014 - 12:14 | 4840853 Satan
Satan's picture

It's not dead, it's just resting...

Tue, 06/10/2014 - 12:16 | 4840860 Soul Glow
Soul Glow's picture

It's just a flesh wound.

Tue, 06/10/2014 - 12:24 | 4840896 Spungo
Spungo's picture

Mission accomplished! It's not like they didn't see this coming. Even youtube saw this coming a year ago:


Tue, 06/10/2014 - 14:35 | 4841475 Tapeworm
Tapeworm's picture

The youtube demonstration is superb. If one wants a very good visual explanation of the goomint debt trap, this is worth linking to your pals.

 Thanks for the link and pass it around.

Tue, 06/10/2014 - 12:27 | 4840903 Satan
Satan's picture

Abe broke the market
Sacrifice liquidity!
Now he has the squirts

Tue, 06/10/2014 - 13:04 | 4841067 FreeNewEnergy
FreeNewEnergy's picture

Oddly enough, I am speechless over the bidless Japanese bond market.

Consider this comment just a fart.

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