Behold Unintended Consequences: Japan Cancels 10Y Auction For First Time Ever Due To Sub-Zero Rates

Tyler Durden's picture

Dear Bank of Japan, how do you spell unintended consequences:


Here is the full Nikkei report on this absolute stunner of a development:

The planned March sale of 10-year Japanese government bonds through banks to retail investors, municipalities and others will be canceled amid expected below-zero yields following the Bank of Japan's recent move to adopt negative interest rates.


The Ministry of Finance is expected to announce Wednesday the first-ever decision to call off sales of 10-year JGBs.


The JGBs in question are sold through Japan Post Bank and regional banks in 50,000 yen ($415) units. The holder can cash out this new type of bond ahead of maturity. With the ministry already having suspended sales of two- and five-year instruments, all sales will end. But variable-rate 10-year JGBs for retail investors will still be offered.


Winning bids at the ministry's auction of 10-year JGBs on Tuesday translated to a record-low average yield of 0.078%. As of Monday, nearly 70% of JGBs on the market already had negative yields, according to the Japan Securities Dealers Association.


Corporations and municipalities have started delaying their own issuances. Daiwa Securities Group has dropped plans to set conditions later this week for the issuance of seven- and 10-year straight bonds this month. The brokerage decided to take a fresh look at JGB yields and investor demand and said it has not decided when to proceed.


The Nagoya Expressway Public Corp., which had planned to float bonds later this week, has postponed the setting of conditions to next week.


Some have gone ahead with plans. Osaka Prefecture issued Monday two-year bonds with a coupon rate of 0.001%. A prefectural official said this was effectively the minimum interest rate, since lower bids were not accepted.

As a reminder, Japan can't monetize more debt - the only thing that is keeping its yields from spontaneously exploding - unless it can concurrently issue more debt. After all the only reason the BOJ did NIRP is because it already faced a limit on how many bonds it can monetize.

So what next: a complete shutdown of Japan's debt-funding machinery, which the country with the 250% debt/GDP is entirely reliant upon?


"Wait, what's that, policy failure less than 3 days after I announced NIRP? Unpossible."


So... what does the most indebted country in the world do now? Treasurys, of course, are delighted: if Japan can't buy Japanese debt, it will buy US paper and will do so in size.

And the real question: how is it even possible that Japan do this without anticipating that its 10Y yields would promptly go sub zero and thus clog up its bond issuance machinery, unless that outcome was precisely the intended one?

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Kaiser Sousa's picture


Dear Morons,

NO matter what you think or do.  Please refrain from the accumulation of physical Gold & Silver.

Sincerly your Best Friends,

The MoneyChangers.


EscapeKey's picture

the solution here clearly is to sell longer-term bonds, thereby solving the problem once and for all

tc06rtw's picture

 …  That’s OK, they can sell German bonds instead.

Killtruck's picture

Paging Dr. Bass.


Dr. Bass to the ICU. 

Code Four. 

THX 1178's picture

Ha i came here to say "Calling Kyle Bass, please pick up your reward for accurate prophecy... etc."

LOL great minds amirite?

Soul Glow's picture

He's busy counting his nickles.  He'll get back to you later.

froze25's picture

How does this strengthen their currency? I thought this would be a sign of instability and would weaken it. but then again in todays world up is down...

Jtrillian's picture

Because who in their right mind would PAY the Japanese government interest to hold their worthless bonds... except for those same governments of course (by printing more money). 

That's what we do in the USA.  Roll them over baby!  Keep this ponzi scheme going... until it doesn't. 

Keynsians will have a hard time accepting that their ecnomic view is inherently flawed.  Our forefathers warned us what would happen if central banks were allowed to control the money supply.  History is destined to repeat itself because we forget the lessons of the past. 

pods's picture

They can blame it on the cold and most people would believe it:

"The weather was so cold that Japan had to cancel a bond auction as the rates dropped below zero."


0b1knob's picture

Unintended consequences?   Government want to monetize the entire debt.  

Janet Shalom Bernanke's picture

I hope the Nikkei plunges deep into Kuroda's fuckashima blow hole.

I'm long Japanese samurai swords and body bags.


First the bond market ceases to function, then the stock market ceases to function, then the currency ceases to function, 

then society ceases  to be civilized, even the sleepy old people in Japan, who have been deafly silent as their stupid-ass gov't has destroyed their economy, will rise-up.    Can't wait to watch it.   



DirkDiggler11's picture

Timing is everything, and Kyle was VERY early to this trade...,

Soul Glow's picture

So Japan goes full NIRP by buying USTs.  They're going to need moar ink jets.

pods's picture

See what happens Larry?

rbg81's picture

This is what happens when you FUCK A STRANGER IN THE ASS!

It's really hard to imagine that people aren't clamoring to lose $$ on Government bonds.  [/s]

Tarzan's picture

too funny, what was considered their last bullets, negative rates...

Central banks have no alternative now, MOAR WAR!

Rainman's picture

JGB 30y at 1.08% ... wooohooo !

undertow1141's picture

And at this rate tommorrow they will be 1.02, then slide calmly and slowly right to zero.

rejected's picture

100 year bonds,,, and the buyer has to be the redeemer.

Bananamerican's picture

No-bell Prize winning idea, Rejected

Perimetr's picture

The Treasury Dept has held an emergency news conference.

1) All $100, $50, and $20 Federal Reserve notes will be withdrawn from circulation; smaller denominations will be allowed to circulate for a period of one year, while new domestic Treasury notes are substituted for them.

2) A new domestic Treasury dollar will be substituted for the Federal Reserve notes being withdrawn; all bank deposits, CDs, Treasury notes and bonds will be converted to the new Treasury dollar.

3) The new domestic Treasury dollar will be only issued in electronic form.

4) All financial transactions within the US will be made with credit cards, debit cards, or a Treasury dollar card, which will be issued by the Federal government to US citizens holding a social security card, or to non-US citiizens in the US with a passport and valid US visa.

5) All domestic US purchases and payments of $250 or more must be paid for with the new Treasury dollar.

6) All government and private pension funds will be converted to the new Treasury dollar, and used to purchase long term US Treasuries.

7) The US mint will cease the production of silver and gold coins.  US citizens will be allowed to possess gold and silver coins which have historical numismatic value.

Have a nice day.


Kaiser Sousa's picture

"The US mint will cease the production of silver and gold coins.  US citizens will be allowed to possess gold and silver coins which have historical numismatic value."

thats kool...already got mine.

Have a nice day.

RadioFlyer's picture
RadioFlyer (not verified) Perimetr Feb 2, 2016 2:42 PM

8) All 401ks will be transferred to and safely held in myRA Bonds until your retirement at age 91.

9) Barter or trade using anything other than new Domestic Treasury Dollar will be punishable by death.


Have a nice day,

The MoneyChangers

Kaiser Sousa's picture

fear of authority is debilitating...

lack of understanding relative to historical fact and undfolding events is ignorance....

"Try as it might, the Indian government appears to be unable to curb the country's love for gold. Its latest attempt - a rule forcing buyers of high-value jewellery to disclose their tax code - has boosted unofficial trading in the world's second-biggest gold consumer, industry experts say, rather than promote transparency and dent demand.

If the rule does fail, gold inflows will continue unabated in India, flying in the face of Prime Minister Narendra Modi's efforts to curb costly imports and stop the metal from being used to hide billions of dollars of undeclared "black money"."


have a nice day.

RafterManFMJ's picture

Banning alcohol, certain drugs, buying gold - I don't understand why it never seems to work?

Just a fault of imperfect humans - not capable of understanding that the government knows best and only has their interests at heart.

Reichstag Fire Dept.'s picture

Fuck off...that didn't just happen...did it?! :o

Tall Tom's picture

Not yet...YET being the key word.


But it is not unthinkable, is it?


I will not turn mine in.


And as for the Death Penalty for anyone trading with anything other than using Reichsmarks???...That was also done in Hitler's Germany.

hongdo's picture

Please don't quit your day job and go to work for .gov.  You would be too successful.  This sounds too realistic.  I'm almost afraid to point out that "shall" is the command word and not "will".

undertow1141's picture

"The people shall bow before the King." Its meaning is still "will" just a more socially acceptable in its wording. The threat of force is still applied.

Takeaction2's picture
Takeaction2 (not verified) Kaiser Sousa Feb 2, 2016 1:59 PM

PLEASE let platinum hit $819 again...  Smack Gold back to 1075...and Silver to 13ish....I need some more time to buy at those prices....

NOTE:We are soooo fucked.

Also, I was watching the "cockus" thing last night...what a backwards half ass way to do things.  In this day and hard to easy to rig.  What a joke.

holgerdanske's picture

Or, in Irish.

Whale oil beef hooked! lol

RafterManFMJ's picture

I'm in a sweat hoping my refund gets into my hands quickly to buy more sweet, sweet metal.

neuronius's picture

I feel ya!  Had you not given your government an interest free loan in the form of your excessive payroll taxes, you would already have your metal safely sunk in the nearest lake!  

JuliaS's picture

Platinum emerged as a valuable commodity after catalytic converters became a mandatory accessory in exhaust systems. Demand exploded overnight because of legislative measures. Then in 2008 when the economy collapsed and vehicle sales tanked, so did the price of platinum. I remember the days when it was worth twice as much gold and it is quite possible that we'll not see the same ratios in our lifetimes.

Demand for cars will only go down in the decades to come. Fewer people will be able to afford them or have the desire to posses an individual mode of transportation.

Platinum has a number of industrial uses, but it is an exotic material with qualities that can be substituted through cheaper alloys when production budgets are squeezed.

I'd stay away from platinum and palladium chachkies, sticking with Silver / Gold.

vq1's picture

part of my wants to hold on to my 10k in yen. for the sake of foreboding

3Wishes's picture

Just mark them %100 loss Bonds to make it easier for the reciever.

Babaloo's picture

It's not clear to me what the problem is and I don't see it explained here.  Is there no demand at negative interest rates, thus they pulled the auction?  AND, if there's no demand, how are 10's trading in the secondary market at sub-zero interest rates?  Doesn't make sense.


Seems to me that this is an ideal situation for the Japanese gov't - people are willing to pay you to lend you money. 

GLG20's picture

Maybe they could issue a boat load of inflation linked JGBs. US TIPS have been trading negative during auctions since 2010 in the front end. The lowest coup assigned is 1/8--not sure what they do in Japan, but 10yr JGBI is trading -.43 yield. Pick your poison.

Menoetius's picture

Have you ever played a game of chess and made a move that you immediately realized was a BIG mistake but, being supercilious and stubborn, you refuse to concede? Instead, in utter desperation you keep making moves in hopes that the opponent makes an equally stupid mistake, whereupon you can at least salvage a draw? That is the situation that the global Central Bankers find themselves in. The problem is that their opponent is no dope.

walküre's picture

Kaiser, you're sounding happier today. I imagine you didn't buy the dip despite all the temptations and cravings?

When things go really bad and the wheels are coming off, are you going to have withdrawal?

Keep up the good work!

ClassicCommodity's picture


Hitlery_4_Dictator's picture

LOL how could they not see this coming....

Central Bankster's picture

Holy shit wouldn't it be funny if the Japan mountain of debt collapse began *because* the BoJ caused a panic out of its bonds with negative interest rates?  LOL is the understatement of year.