Sudden Plunge In Japanese Government Bonds Triggers Circuit Breaker, Halts Market For 30 Seconds

Tyler Durden's picture

It was just yesterday when we observed the record collapse across the Japanese curve when first the 10Y JGB plunged to an all time low -0.10%, followed promptly by 30Y yields dropping 21bps - the biggest absolute drop in over 3 years and biggest percentage drop ever - to a record low 47bps following Japan's 30Year auction on Monday night. As we further noted, since Kuroda unleashed NIRP, the entire JGB curve has been crushed and the Monday night rush for long duration debt flattened the curve to record lows.

 

What a difference a day makes.

Just 24 hours later trading of Japan’s government bond futures was halted for less 30 second after the price of the contracts dropped as much as 0.6 percent. As Bloomberg reports, the dynamic circuit breaker on the Osaka Securities Exchange was activated at 12:32 p.m. and was applied to March contracts according to Masaki Takahashi, who works in the market management department at the Osaka Securities Exchange.

The website of the OSE parent Japan Exchange’s website said the circuit breaker is triggered "to temporarily halt trading in order to allow investors to calm down when the market is overly volatile."

The reason for the trading halt is that a day after sliding to the lowest yield on record, on Wednesday the benchmark 10-year bond tumbled, pushing yields up eight basis points to minus 0.015 percent as of 2:51 p.m. Yields rebounded after dropping more than five basis points to a record minus 0.1 percent Tuesday. The selloff was triggered after an increase in selling into the BOJ's POMO when the bid-to-cover ratio for debt with 10 to 20 years to maturity rose to 3.58 from 2.93 last week, indicating stronger investor demand to sell, and that investors were looking to offload inventory to the BOJ.

"Weak outcome of BOJ’s bond purchase, especially 10y-25y tenor, spurs selling JGBs given that yesterday’s rally was excessive move,” says Takenobu Nakashima, quantitative strategist at Nomura Securities.

The BOJ’s bond operation result spurred JGB selling “given that yesterday’s rally was excessive,” Nakashima said.

Here is the dramatic surge in yields, the biggest jump since February 12.

 

And here is the moment the price collapsed triggering the circuit breaker.

 

And so the market chaos even among the "safest" of securities, the result of central bank intervention, continues. Bloomberg's Richard Breslow summarized it best:

Even with QEs creating what look an awful lot like bubbles, it’s been fair to say, those distortions reflected the reaction function of how central bankers interpreted the state of play. Yield levels, let alone negative rates, and volatility are making these guideposts increasingly questionable.

 

If you look at the yield curves of much of the world, you’d be hard pressed not to conclude we are very much still experiencing a severe global recession. Central bankers may strongly disagree, yet Japanese 10-year JGBs haven’t seen 2% this century. German bunds have backed up to 21bps. Both are likely to increase QE. The U.S. is tightening (?) and 10- year yields are still down 42bps on the year

 

The Fed wants to raise rates but insists on re-investing the take on its massive portfolio. They act like fund managers protecting their AUM.

 

The Osaka Stock Exchange had to invoke circuit breakers today on the March JGB future for excessive volatility. Buying panic yesterday to front-run today’s QE buying led to panic selling today into BOJ bids 22 bps through Monday’s close. Oh, and did I mention, ahead of an auction tomorrow. The take-away is mayhem, not analysis.

And now we look forward to an even greater surge in volatility first ahead of tomorrow's ECB meeting, and then first the Fed and BOJ next week, who - just like everyone else - have no idea what is going on any more.

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Squid-puppets a-go-go's picture

no one is buying these bonds except the jap CB.

30 years , less than half a percent? c'mon. I'd get a better return shoving a hundred dollar bill in my cats anus

raywolf's picture

unwise to invest is asshole cramming... as the JCB is about to discover... "-)

Nutsack's picture

Tell that to Barak and Ben (__0__) Finkenbinder

StackShinyStuff's picture

"The take-away is mayhem, not analysis."

 

PROJECT Mayhem perhaps?

old naughty's picture

wait, "circuit breaker" brought down the chinese sec-guru...do we expect same in land of the never-setting sun then?

new game's picture

so is the blowjob bank of jap buying 100 percent of the bonds issued yet? or is it just 80 percent.

think about this? how does this go on? it is like our social security system. so they print yen and we print dolla, shelve bonds at boj, and the fed picks up any slack over here.

all sound and sustainable, yup, i approve s/

VinceFostersGhost's picture

 

 

I don't usually get up this early......but I sensed a rift in the force.

 

Did Bernie really win Michigan? Molly geez!

 

Halts Market For 30 Seconds

 

I can do 30 Seconds standing on my freakin head...

Squid-puppets a-go-go's picture

"its like 100 000 lobbyists screamed out in terror and then were suddenly silent...."

VinceFostersGhost's picture

 

 

Millions of Illegal aliens are looking at that sayin........that can't be good.

 

Help us Obi-Wan Marco!

The best Sun's picture

I too felt a great diturbance in the force.

As if millions of voices suddenly cried out in terror and were suddenly silenced.

I feared something terrible has happened.

However it was just the bitch that had you wasted lost.

Not that it will matter in the end with the super delegate situation.

Gotta love the appearance of democracy.

 

 

FreeNewEnergy's picture

Exactly what I was thinking. Getting a 1/2% (or less) return over 30 years from the government isn't exactly what I'd call confidence-inspiring. Yeah, loan us $10k now, we'll pay you $50 a year until 2046, and then you'll get your $10k back. Unfortunately, that $10k, which in 2016 could have bought a used Toyota, will probably only buy you the tires.

So, no. No thanks.

Problem is, there are no good investments besides baiscally, gold and silver. For instance, I bought 5.7 acres of raw land for $14k last year. The taxes on this small parcel are roughly $700. So, over 30 years - if I live to see it - That's $21,000, or 50% more than what I paid in the first place and that's if taxes dont go up (fat chance). Sure, I can produce easily $700 worth of crops and or revenue - and that will be taxed as well - but it's really an investment in peace, solitude and a good shooting location when the redcoats come calling.

Also a good place to bury my PMs, but, not an investment that offers much in the way of return.

Here's the best part: called the local assessor and said I'd like my assessment lowered because I paid $14k and the land is assessed at $18.5. He told me that just because I paid that price would not automatically reduce the assessment. I asked him, then, what is the meaning of fair market value (their basis), if not what one paid in a free market transaction? His response was that there was more to it than that. I said yeah, like your pension and health care plan, for instance. The conversation devolved from there.

This place (upstate NY, and the rest of the country) is so fucked. Fuck government. Forever. 30 years? Yeah, sure. 

JamesBond's picture

minus inflaton =  ?

 

jb

opt out's picture

I had a similar conversation with my local assessor - also 5 acres in upstate NY - with similar results. The tax situation is unbearable. I get no town water, no sewer, no garbage collection, I plow my own road, and have no kids in school and yet pay over 8K a year in town and school taxes. I worked a ton of hours last year and made @120K but paid almost 50K in local, state, federal, income, medicare, social security taxes. I pay 80 cents in tax on a gallon of diesel fuel for my equipment. FOR FUCKS SAKE I COULD HAVE JUST ADOPTED A FUCKING TIT-SUCKING UNEMPLOYED ASSHOLE AND HAD 'EM MOVE IN FULL TIME FOR LESS FUCKING MONEY.

Sorry. Had to get it out

off to buy more ammo...

The Blank Stare's picture

That sucks for you two and many others. These resource/hegemonic wars have to stop. I hope trump can do it.

lemontree2's picture

Doesn't matter. Futures up. Europe up. Oil up. Transfer of wealth must go on. The show must go on. Best regards central Banksters and the establishment

VinceFostersGhost's picture

 

 

Doesn't matter. Futures up. Europe up. Oil up.

 

Really only interested in gold at this point.

 

So all the banks are buying oil.......do they have storage? I hope they thought this out.

vote_libertarian_party's picture

All that matters is delay the panic that may occur today.

 

Tomorrow is long term planning.

jose.six.pack's picture

These overnight articles are a treat for the EU ZH audience. I hope it is not a sporadic overnight watch and becomes the norm.

Paveway IV's picture

Well, at least for the rest of the time the EU exists. After that, you'll have to depend on Reddit and Pinterest. They're not exactly Fight Club, but chock full of stuff you need to know. Good luck! 

Infinite QE's picture

Someone, or something, still buying Japanese govt debt? That's a shocker.

- - - - - -'s picture

 

 

japanese economy is broken up so it can be bought up for free after ttp

 

the japanese will lose their country to "foreigners"

their media will then brainwash their population and they will end up like europe with the eu

some foreign criminals will take out everything inside the country

japanese elite will be silently replaced

walküre's picture

Duct tape and shoe strings

Sheeple are clueless. Fraud is so easy these days.

VinceFostersGhost's picture

 

 

Fraud is so easy these days.

 

I prefer to call it low information voter harvesting.

 

Thank you Common Core!

JamesBond's picture

College and Career Ready, my friend.  The education ferris wheel never stops turning.  

 

jb

the_narrator's picture

So with negative interest rates, when the government borrows they're getting free printed money from the central bank doing POMOs?  Seems like very sneaky double backdoor seigniorage going on here in Japan.

Dragon HAwk's picture

So 30 seconds later the market changes direction.. what changed in 30 seconds

lemontree2's picture

Did I forget to mention. gold down.

VinceFostersGhost's picture

 

 

I'll buy some....how much do you have?

Paveway IV's picture

You mean PAPER? Unlimited quantities - how much do you want to buy and do you have a loading dock with forklift or overhead crane capability?

We can do digital, too. How big is your hard drive? I'll sell it to you as long as you can remain awake, solvent and connected to the internet.

lemontree2's picture

Stawks up. Europe up. Futures up. Oil up. Gold down. Transfer of wealth must go on. Best regards , you know who, central Banksters and the establishment

Allen_H's picture

Such utter bullsheite, let the fucker burn.

buzzsaw99's picture

30 seconds is a long time in algo-years. flip a switch, probrem solved.

Manipuflation's picture

I really haven't met anyone who is fessing up to supporting Hillary.  I have seen some Bernie Sanders Bumper stickers.  I have always wondered about political bumber stickers.  Why the hell would you place a political sticker on your car?  There is no reason to do so.  Do you really think your bumper sticker is going to make the difference?  I don't get it at all.  Here we go again with people who look at me like I am strange.  Oh...... now that I saw that bumper sticker I am sure that I will change my worthless vote.  Politics is all about your bumper sticker you know...until I smash into your piece of shit with my aged 96 Lincoln TownCar with no bumper stickers on it and hit the gas one last time.

People just stare at me sometimes.  I do not care.  I have respect for Johnny Knoxville.