Japan Sells 10Y Bond At Negative Yield For First Time Ever

Tyler Durden's picture

As we detailed earlier, for the first time in the history of crazy, Japan 'sold' 10-year government bonds today at a negative yield. Translated into English, this means "investors" agreed to pay the Japanese government 2.4bps per year for the privilege of lending it money for 10 years...

Down from a 7.8bps positive yield at the last auction, the 10Y auction's average yield was -2.4bps...


Peter Pan(ic) continues as the rest of the JGB curve collapses to fresh record low yields and await the reaction in Japanese bank stocks...


Charts: Bloomberg

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Yen Cross's picture

    That's going to leave a mark, on some derivatives.

 Kyle Bass is going to be pleased... Welcome to the beginning of the end, for Japan.  " Finally"

 Maybe I can find a an old Toyota 3000 GT for cheap?

Beatscape's picture

A new breed of irrational masochist investors, fascinating.

Tyrone Shoelaces's picture

I'm betting they sold them to themselves  LOL


philipat's picture

Mad. Is this a reverse Carry trade, Buy Yen and Sell Dollars based on a longer-term reversal of USD/JPY??

TahoeBilly2012's picture

I don't get it, what's the upside? Why wouldn't you hold cash?? 

El Oregonian's picture

The upside is... YOU DON'T LIVE IN JAPAN!!! Those people are into Seppuku!

Vlad the Inhaler's picture

The upside is that other holdings (such as cash) may perform even worse over those 10 years.

orez65's picture

"The upside is that other holdings (such as cash) may perform even worse over those 10 years."

Got me on that explination.

At maturity you get cash, if you sell the bond before maturity you get cash. So how can cash do any worse than a bond?

I would think that cash would do better because you don't have to pay anyone to keep your cash.

Maybe you are being sarcastic?

Squid-puppets a-go-go's picture

Lets not get ahead of ourselves - the JCB already owns about 80% of all Jap gov bonds if i remember correctly (please correct me if wrong)

Id be surprised to know if ANY private entity actually bought into any of this madness

wattie's picture

It may perform better as if you keep that cash in the bank you may get bailed in and lose it all/some.......under the mattress is best!

The_Small_Lebowski's picture

I think the premise is that if these bonds continue to be sought after by more investors as the world collapses (safe haven dont cha know), the value of the bond will go up which should outstrip the neg yield. Where do i join the q?

djrichard's picture

I have to imagine the upside is the promise that the Central Bank of Japan will be the greater fool and buy the bonds at an even higher price later on.

Pumpkin's picture

I don't get it, what's the upside? Why wouldn't you hold cash??


This is what I've been saying.  I never knew people were so damned guilible when it comes to their money.  If I were a billionaire, I build my own vault (floodable) with my own gaurds.  Fuck the banks.

Overflow-admin's picture

Same same for MS Windows Local accounts; Cf. Hiren's boot CD ;)

Long Hacking Knowledge.

Bossman1967's picture

I know now that we are living in the twightlight zone what the fuck. Sure let me pay the Japaneese with all that radiation money to give me the privledge of holding my cold soft shitty cash. NEVER. PHYZ

i_call_you_my_base's picture

Before the end of this Japan is going to be giving out free Probes to buy these bonds.

pillory-hillary's picture

you see its allll clear, we were meant to be heeeerreee

...from the beginning



NoDebt's picture

I'm ready to go now.  I've seen everything.

And we all thought Communism was a political philosophy.  Sadly, no, it's just another money game.  Now hold still, we just need to draw another pint from you for the Greater Good.


Oldwood's picture

Don't be so damned "negative".

They are doing god's work desperately trying EVERYTHING to save us...them...it.

Okay...we're done.

philipat's picture

SHould read "Savee us from them"?

highly debtful's picture

It will be interesting to witness firsthand how exactly going bust will play out in this high tech, just in time global economy, where hardly anybody in the first world still knows what a spade looks like. 

medium giraffe's picture

I'm not sure that many really appreciate the fragility of current supply lines.  The best example of this was during the '11 quake.  Major producers of NAND chips in Japan halted production for a few seconds during the quake.  The disruption to the supply chain caused a significant price rise in Hard Drives and other components for the next year or so.  As you say, everything is JIT, there is no inventory anywhere.  And anyone not paying attention to conditions in Greece and Venezuela will be in for a nasty surprise.   It will be brutal for the unprepared, but at least it will be short.

OldPhart's picture

WE have inventory.  A former VP loaded us up with Steel back in 2013.  I'm looking at a rough $1.5 million write down of steel inventory to get it in line with current prices.  Once done at FYE (3/31) our steel sales will be pretty spectacular.  Cost of goods will be realistic and we're still selling the shit out of steel.  Readymix is depressed, and we have major upgrades impeding our quarries, sttel fabrication is kicking ass every month, recycling is stable, and transportation is a solid winner.  I know we're in a depression, but we're in an amazing position...we have over 300k in zero interest loans.  It's fucking bizarre!

Average diesel price is hovering around $1.85, Quarry pit moves are going to CIP, and transportation is precisely on budget (uncanny).  Steel sales, though, are killing us with the high COGS.  Software uses average cost, that's a pain in the ass when prices drop significantly.

Pheonyte's picture

I will gladly pay you today if you pay me back less in 10 years.


NoDebt's picture

Government Bonds are the new barbarous relic.  They just sit there and take your money.


SoilMyselfRotten's picture

Not to mention, YOU CAN'T EAT THEM


I can't decide on who is crazier, the people selling the 10 year bond at negative rates or the people buying them. 

Oldwood's picture

There are no motives short of fear based wealth preservation that are not perverse.

Beowulf55's picture

Don't these people know about gold and silver?

NoDebt's picture

The people buying them.  But we're all certain we can get out before everyone else does.


HardlyZero's picture

Such a burden !

Next I will have to pay my kids to take the handouts.

(sounds like Rodney Dangerfeld...get's no respect)

NEOSERF's picture

Only real question is why the bond buyers (elderly, JCB and some Japanese multinationals) think that hyperinflation is going to bloom out of the ashes of Japan Inc.  On the other hand if you are Matsushita and are looking at losing more money this year on every dollar you spend and need to stifle the dividend hawks that want every bit of cash paid out to starving pensioners, then parking it in bonds might make some sense.

jcdenton's picture

Perhaps we now see Wanta's logic ..


It's more than logic. It just damn dire good advice. I don't really think we (Americans) have a choice in the matter anymore ..

This has become on the one hand, a mathematical certainty. On the other, a moral imperative ..

We now see what is happening in Japan. I lived there for a year+ in the early 80s. 260 Yen to the USD. Good times ..

Talk to Harry Dent about what he sees for China. We see what is happening in UK/Europe, the ME, Africa, S America, Mexico and C America. Even Australia. Canada is worse off than the USA ..

It will be getting bad for us as well. But, count ourselves fortunate compared to all the rest ..


Lest not we also forget admonitions from Col. Macgregor ..


OldPhart's picture

Yes, we're in the catbird seat right up until the moment that the dollar loses Reserve Currency status.

THEN we are really, truely fucked.  How many millions of dollars will it take to buy a BigMac?  Instantly.  A year later, gold at 4m per ounce in dollars...we just have to survive that year in betweeen.

Looking to my left.  Need a shitload more water.  A lot more comfort food like boiled peanuts and tomatoes, okra and corn (in one gag inducing can that my wife loves), black eyed peas, collard greens, seasoned cabbage, cheddar cheese soup, powdered milk, condensed milk, maybe three cases of corn [stood up and took a serious look, fuck it, five cases of everything.  Stack the excess on the floor.]  Costco and Dollar General and that out of date ObamaStore are about to be seriously hit.  MIght as well get some condiments, pickles, olives and pasta too.  Do this shit right and it'll be less than $1,500.  (Still need the generator and 7,000 gal water tank.) Freezer, need another hundred pounds of rib eyes, 30 pounds of pork chops, 75 pounds of bacon, ten pounds of chicken..wait, what?  Need seven cases of canned chicken, too.  Roast beef, good, corned beef, good, seafood, good.  Ned to get some nuts, Pistachios in particular...fifty pounds.  Newberry  Springs should be up and running pretty soon, if it works out I'll pick up another 100# in Septembr.  Bottled water, ten more of that kirkland shit.


Should have chickens, rabbits and a cow or two, but my childhood has me reluctant to go into that.  I don't want to feel the responsibility of feeding a bunch of fucking animals, every day, twice a day.  It's weird, but I just can't make myself do it.

BandGap's picture

Can anyone give me one good reason why someone would do this? I am at a loss to understand why anyone would do such a thing.

i_call_you_my_base's picture

Isn't it just bought by banks and used as collateral on some bullshit arbitrage? I can't think of any reason other than that.

NoDebt's picture

No, I can't.  And I have devoted some considerable thought to the matter.  Thought maybe it was carry-trade-related but it's not.  Yields have been dropping largely no matter what's happening in FX world.

I'm clueless.

If you believe the "market" for government bonds, the world is going into staganation (i.e. depression) with the USD expected to depreciate significantly relative to all other currencies.


i_call_you_my_base's picture

Maybe people being forced to? Nationalism? Access to unblurred pornography?

HardlyZero's picture

This may all be pre-conditioning for when many fiat currency collapses.  So -1% in USD, is better than -50% in a different failing fiat.  They want to keep your faith.

MadVladtheconquerer's picture

Thus, buying long UST bonds would be a way to front-run this scenario.  Paradoxes abound.

xrxs's picture

Because the buyers expect things will get even NIRPier?

HardlyZero's picture

It must be (note the quotes):

For the "priviledge" of doing "business" with the "Banks".


SumSUN's picture

This is the best explanation I've found.


Second, negative yields could potentially be correctly forecasting a sharp economic slowdown, which, as a consequence, could lead to an increase in defaults (both corporate and sovereign) in the future. Deflation has a similar effect. Paying up now and receiving less nominal money in the future can be profitable if the price of goods has fallen sufficiently. Note that defaults and deflation usually go hand in hand. In such a scenario, the return of money becomes more important than the return on money. If this is true, then the premium above the face value one pays for a zero coupon cash flow is the “insurance premium” for a perceived higher likelihood of the return of invested capital. 



probablywrong's picture

That explantion makes sense. Depressing as hell but (probably right)!

Bernoulli's picture

It makes sense, but at the same time not.

PIMCO's insight that  "the return of money becomes more important than the return on money" makes total sense. I fully agree 100%!

But what doesn't make sense at all is why anybody in their right mind would believe that if we are entering a full blown depression ("sharp economic slowdown", "increase in defaults (both corporate and sovereign)", "price of goods fall sufficiently", "deflation") that Japan - with a government debt to GDP ratio of somewhere north of 230% - will actually be able to RETURN THE FUCKING MONEY?!?!? This is a complete joke! They - of all countries - will default first and will never pay back the full principal!

The best explanation I can come up with is that nobody is looking at the ever decreasing interest "payments" anymore, but only on the rising value of the bonds. It's a massive bubble. Maybe the biggest one ever blown. And it will bring down the financial system as we know it.




MadVladtheconquerer's picture

"The return OF the principal vs the return ON the principal"

Mark Twain said it before PIMCO:  http://thenewageofeconomicresponsibility.blogspot.com/2009/03/its-not-re...

Look up 'Batista Bonds':  https://www.creators.com/read/taking-stock/03/15/cuban-bonds