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Japan's Kokusai Liquidates Remainder Of Euro Sovereign Exposure, Just As European Primary Issuance Supply Surges

Tyler Durden's picture




 

When we discussed the specifics of the ongoing European bank run, we cited from the NYT which noted the actions of a core Japanese mutual fund with European sovereign exposure, namely that "earlier this month, Kokusai Asset Management in Japan unloaded nearly $1 billion in Italian debt." The Nikkei has just reported that this was merely the beginning: "Kokusai Asset Management Co. has sold all Spanish and Belgian government bonds that were part of its flagship fund, Global Sovereign Open, The Nikkei learned Monday. As of Nov. 10, Spanish and Belgian bonds accounted for 1.8% and 3.1% of the fund, respectively. The share of the bonds in the fund's portfolio fell to zero as of Thursday." Just what prompted this drastic move and very loud slap in the face of the European confidence building exercise? "A Kokusai Asset Management official said the company sold off the bonds, amid widespread concerns about the outlook for Europe's sovereign debt crisis to avoid hurting the value of the fund, given volatile prices of the bonds. The mutual fund operator had already divested the fund of all its French government bonds in October and all Italian bonds in early November." It is safe to say that where one core asset managers has been (and no longer is), everyone else will shortly follow. For the simple reason that it is now if not cool to not have European exposure, it is certainly required by one's LPs to cut down on all European bonds. Kokusai is merely the canary: expect everyone else to go ahead and dump the €741 billion in non-domestically held Italian (and then all other European sovereigns) bonds. Good luck ECB buying these in the secondary market. And one market where the ECB can do nothing by charter, is the primary issuance one, where as the following update from Morgan Stanley shows, things are getting from from bad to worse.

Issuance between now and year-end

 

A near-term silver lining for many countries is that their 2011 bond issuance programmes are drawing to a close in many cases (see Exhibit 4). France, Netherlands and Portugal have all completed their bond issuance programmes. However, Germany, Italy and Spain still have a fair way to go. In 2012, of course, bond issuance will have to resume.

In the meantime, there is still quite a lot of T- bill and bond supply coming up before year-end (Exhibit 5). The week of the 28 November will be a heavy  upply week; with issuance from Belgium, Italy, France and Spain. If the pattern of worsening auctions persisted, it would be very bad news for euro area sovereigns, in our view.

 

And if, IF, Europe somehow finds a buyer for all of this stuff even as all other prudent asset managers are mimicking the Tesoro and selling on their own...then we get 2012, where things go from bad to worse to truly surreal - sorry Jim O'Neill, but in this case your astonishment would be perfectly valid.

 

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Sun, 11/20/2011 - 23:22 | 1897451 phungus_mungus
phungus_mungus's picture

Looks like all the chickens are starting to come home to roost

Sun, 11/20/2011 - 23:35 | 1897486 trav7777
trav7777's picture

WTF did the PIIGS expect when the cheating cashflow swaps they executed during EU accession came due?

Sun, 11/20/2011 - 23:45 | 1897503 paarsons
paarsons's picture

Trust me.

Europe will still get Asian money.

This is mutually assured economic destruction.

In order to keep the Ponzi going, ALL must participate.

http://fucklloydblankfein.blogspot.com

Mon, 11/21/2011 - 00:15 | 1897557 Spitzer
Spitzer's picture

When is the last time Japan did something right ? macro economically ?

If Japan is selling Euro's, the bottom is in.

Im going long...

Mon, 11/21/2011 - 00:21 | 1897572 Fish Gone Bad
Fish Gone Bad's picture

Q: What did the hand say to the face?

A: Slap!!!!

Mon, 11/21/2011 - 00:23 | 1897578 homersimpson
homersimpson's picture

Why do Western folks assume Eastern folks are stupid?

Have you ever tried to part a Chinese dude with his dollar? Odds are he'll hold it tighter than you can pull it..

In other words, you have a better chance of finding gold in your backyard than China/Japan bailing out Europe.

Mon, 11/21/2011 - 00:40 | 1897601 Citxmech
Citxmech's picture

I wanna know who bought that shit.  =o

Mon, 11/21/2011 - 01:13 | 1897656 lolmao500
lolmao500's picture

Why do Western folks assume Eastern folks are stupid?

Mmm might be the FACT that Japan and China hold more then 2 trillion of crappy US debt? That Japan's economy has been going bad for the last 20 years? That China's economy is as big a ponzi scheme as the US economy? (maybe even bigger)

Mon, 11/21/2011 - 02:29 | 1897742 malek
malek's picture

Well at least for China it was likely an accepted trade-off for getting production capacity built up and running in their country by western companies...

Mon, 11/21/2011 - 01:00 | 1897633 bigun
bigun's picture

drop it like its hot!!!!!!!!!~~~

Mon, 11/21/2011 - 06:10 | 1897856 rufusbird
rufusbird's picture

"I guess she don't like the cornbread neither!"

Mon, 11/21/2011 - 01:14 | 1897661 Michael
Michael's picture

pm, Did you hear the Chinese housing bubble bust is accelerating. 17 of 70 major cities prices down in September and 34 of 70 major cities prices down in October or something close to that. Once a mega housing bubble starts to burst, there's no stopping it. Trust me.

Sun, 11/20/2011 - 23:25 | 1897457 Bansters-in-my-...
Bansters-in-my- feces's picture

Sweeeeet.

Mon, 11/21/2011 - 07:22 | 1897884 Zero Govt
Zero Govt's picture

the sugar coating was sweet, all that AAA rated gloss, just took a while to realise they'd bought a turd dumped by politicians who are by far the least trustworthy people in world history

How's Americas Super Committee getting on making cuts to repay all their debtors as they promised? ...Oh they've renaged... shock-horror surprise we're all simply fuking stunned

...and Nancy Peloski-Trotski had donned her cape and spandex tights too promising $4 Trillion of cuts and didn't manage $4 Dollars! She's so disapointed she had to take her taxpayer funded Gulfstream back to SanFran (the publicly subsidised buses and trains not for her then ...some pigs on Animal Farm are more equal than others obviously)

Sun, 11/20/2011 - 23:28 | 1897470 Golden Boy
Golden Boy's picture

I'm tired of the foreplay. I want to see some "fuck the creditors in the ass" defaults.

Sun, 11/20/2011 - 23:32 | 1897476 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture

You need help.

Sun, 11/20/2011 - 23:35 | 1897485 Golden Boy
Golden Boy's picture

Let me guess. You're long the recovery and short the hyperinflationary holocaust that is 100% sure to come.

Sun, 11/20/2011 - 23:52 | 1897516 JPM Hater001
JPM Hater001's picture

I can help him...or her...whatever

Now I lay you down so deep

Fuck you and ben you banker creep

Let bond and blunder plague your day

Until someone comes with a gun your way.

Amen.

Mon, 11/21/2011 - 00:42 | 1897608 lincolnsteffens
lincolnsteffens's picture

+++Thanks for the late night laugh!!!

Mon, 11/21/2011 - 04:50 | 1897835 OldPhart
OldPhart's picture

It doesn't accept negative numbers.

Mon, 11/21/2011 - 07:28 | 1897886 daily bread
daily bread's picture

It will if you are in the 1%.

Mon, 11/21/2011 - 06:33 | 1897861 Vlad Tepid
Vlad Tepid's picture

I like that they take a credit card. How apropos.

Sun, 11/20/2011 - 23:39 | 1897492 Osmium
Osmium's picture

Don't sugar coat it, tell us how you really feel  :)

Sun, 11/20/2011 - 23:51 | 1897512 Ineverslice
Ineverslice's picture

Hear, hear!!! And yes, I need all the help I can get when I can git it.

Sun, 11/20/2011 - 23:31 | 1897474 1a2b3c4d
1a2b3c4d's picture

The only question left is: how do I make money off of this?

Sun, 11/20/2011 - 23:35 | 1897483 LowProfile
LowProfile's picture

Starts with g and ends with d.

Sun, 11/20/2011 - 23:48 | 1897506 HardwoodAg
HardwoodAg's picture

Let me guess, Silver?

Sun, 11/20/2011 - 23:53 | 1897519 Neidhammel
Neidhammel's picture

Very close. Solution is praying to GOD for guidance.

Mon, 11/21/2011 - 00:26 | 1897583 Kali
Kali's picture

Which god is that?

Mon, 11/21/2011 - 00:33 | 1897590 homersimpson
homersimpson's picture

The one that doesn't appear when you smoke something.

Mon, 11/21/2011 - 00:36 | 1897593 Bansters-in-my-...
Bansters-in-my- feces's picture

The Gold God.

Mon, 11/21/2011 - 01:43 | 1897689 Hearst
Hearst's picture

The God who raised Jesus from the dead.

Mon, 11/21/2011 - 02:01 | 1897708 StychoKiller
StychoKiller's picture

Kali!  What is thy bidding, my Mistress?

Mon, 11/21/2011 - 03:42 | 1897787 Kali
Kali's picture

Lol!  PREPARE!  The Kali Yuga is upon us!

And smyte these damn jesus freaks with no sense of humor.  Please.

Mon, 11/21/2011 - 00:24 | 1897579 homersimpson
homersimpson's picture

FAZ does the job well, too, if you can take the beating from time to time.

Sun, 11/20/2011 - 23:42 | 1897489 williambanzai7
williambanzai7's picture

My favorite Japanese business expression: It is very difficult.

Just say musokashi na ten times and you get the idea.

Mon, 11/21/2011 - 04:06 | 1897802 chindit13
chindit13's picture

Taihen da ne!

By the way, Kokusai is a survivor, so canary---or bellwether---is an apt term.

Mon, 11/21/2011 - 06:35 | 1897862 Vlad Tepid
Vlad Tepid's picture

muzukashii

Sun, 11/20/2011 - 23:39 | 1897491 Seasmoke
Seasmoke's picture

RUN, do not walk , to the exits

Sun, 11/20/2011 - 23:44 | 1897498 kito
kito's picture

No worries!!!! The messiah has been elected in spain!!!! Euro rally will be strong!!!!

Mon, 11/21/2011 - 01:20 | 1897670 Beam Me Up Scotty
Beam Me Up Scotty's picture

Obama got elected in Spain now too??

Mon, 11/21/2011 - 02:04 | 1897712 StychoKiller
StychoKiller's picture

I fail to understand how Spanish voters came to the conclusion that electing conservatives to Govt can fix Socialist-caused problems AND maintain Socialist programs for pensions and guaranteed Govt jobs -- WTF??

Sun, 11/20/2011 - 23:44 | 1897500 Mentaliusanything
Mentaliusanything's picture

$741 Billion needs to find a willing Buyer. Now let me think, who will be the Patsy that ends up owning that pigs shite.

There is not enough existing Fiat attached to brain dead Sovereigns to cover that amount. ECB can't do it and the locals are tapped out. Where do you find a lazy three quarters of a $Trillion. Even the US Feds would find it hard to stump up this amount

I have a feeling its ECB printing time or else its Tits up for the European Union.

Even a circle jerk comes to an exhausted end

Don't you Love Bond vigilantes

 

Sun, 11/20/2011 - 23:51 | 1897510 Kali
Kali's picture

I would like to give props to Knukles while I am popping more popcorn.  You are right, this is it, we are in the meltdown now.  It will only increase in speed and intensity from here on out.  If you haven't already, better finish making your last minute preps, time is out.

Mon, 11/21/2011 - 06:58 | 1897873 Zero Govt
Zero Govt's picture

i've a terrible feeling the delusional retards will drag it out longer than we can imagine (or stand!)

Mon, 11/21/2011 - 07:02 | 1897874 Ghordius
Ghordius's picture

me too - my expectation is around two years

and then it will come like a thief in the night

Sun, 11/20/2011 - 23:52 | 1897515 sitenine
sitenine's picture

Anybody giving odds on unplanned issuances?

Sun, 11/20/2011 - 23:52 | 1897517 monopoly
monopoly's picture

When this train stops and all get off. Look out. How can you just own dollars. Makes 0 sense to me.

Sun, 11/20/2011 - 23:55 | 1897523 Mike2756
Mike2756's picture

And when this unwinds, what happens to the yen?

Mon, 11/21/2011 - 00:01 | 1897531 slewie the pi-rat
slewie the pi-rat's picture

<=== let's play "kick the can"

<=== let's play "hot potato"

Mon, 11/21/2011 - 07:05 | 1897875 Ghordius
Ghordius's picture

I want to play both!

And I want my European Committees to be "Super", too!

 

It's so unfair that we get the the second tier committes here... all superheros are in DC and we have mere "technocrats"... ;-)

Mon, 11/21/2011 - 08:20 | 1897915 Jendrzejczyk
Jendrzejczyk's picture

Can we kick a hot potato?

Mon, 11/21/2011 - 00:05 | 1897538 firstdivision
firstdivision's picture

Why is the Euro slope positive?

Mon, 11/21/2011 - 00:27 | 1897584 Spitzer
Spitzer's picture

because contrary to popular beliefe, its better then the dollar

Mon, 11/21/2011 - 07:06 | 1897876 Ghordius
Ghordius's picture

slightly better, Spitzer. slightly

rhymes with "softly"

Mon, 11/21/2011 - 00:09 | 1897545 runlevel
runlevel's picture

whoa no way.. 

 

- randy marsh

Mon, 11/21/2011 - 00:13 | 1897552 Caviar Emptor
Caviar Emptor's picture

The world changed a lot from the week that Greek bond haircuts were finally allowed and MF Global went bust. That signaled the re-emergence of risk after it was assumed for a long time that anything that moved would get bailed and any idiot would be made whole. 

Slowly, they're awakening to the deafening silence of the Fed: no MFG bailout, Greek sovereign haircuts are ok...and perhaps so are Italian haircuts ok. And who knows what that means for banks with exposure. Hence Vanguard dumps its big holdings in a solid Dutch bank. 

Like a sexually transmitted infection, the spread of risk gets around because nobody knows who slept with whom. 

Mon, 11/21/2011 - 00:20 | 1897569 Caviar Emptor
Caviar Emptor's picture

GOP congressman calls Occupy movement 'anti-American' 

Mon, 11/21/2011 - 00:40 | 1897602 Fish Gone Bad
Fish Gone Bad's picture

That pesky Bill of Rights must have been written by some foreigners.

For those new to How things work:

Bankers raise money for politicians.

Politicians control the military and police.

Military and police protect the interests of politicians.

If you want to be the 1% you need to go into banking.   With about $5 million dollars you can start your own banking empire.  If you do not know where to find the $5 million, please consider that a homework problem.

Mon, 11/21/2011 - 00:43 | 1897614 LongOfTooth
LongOfTooth's picture

Are you surprised that them thieving s.o.b.s would think that way?

 

 

Mon, 11/21/2011 - 00:21 | 1897571 samsara
samsara's picture

How does this square with what Kyle Bass  was saying?

Mon, 11/21/2011 - 00:38 | 1897595 sitenine
sitenine's picture

Square.  Kyle Bass knows what's up.

Mon, 11/21/2011 - 00:41 | 1897606 LongOfTooth
LongOfTooth's picture

I see no problem.  In fact this story makes me think what Mr. Bass is predicting is going to be happening sooner rather than later.

 

Mon, 11/21/2011 - 06:38 | 1897863 Vlad Tepid
Vlad Tepid's picture

Maybe the Japanese heard Bass and decided to sober up from 40 years of unadulterated Kenynesianism/get solvent again.  It'll be a long road but if anyone is up for austerity, it's the Japanese.

Mon, 11/21/2011 - 00:27 | 1897585 Caviar Emptor
Caviar Emptor's picture

We're getting closer to crunch time: it's monetize to the moon or find a way to default 

Mon, 11/21/2011 - 00:38 | 1897596 Mike2756
Mon, 11/21/2011 - 00:41 | 1897604 Dirtt
Dirtt's picture

BREAKING NEWS: Jon-ji Corzinesai has just been named the new CEO at Kokusai Asset Management Co.  Yields across the EuroZombie are plummeting rapidly in the last minutes....working.

Mon, 11/21/2011 - 01:07 | 1897651 lolmao500
lolmao500's picture

Linky to watch all PIIGS countries yields in real time? Thanks

Mon, 11/21/2011 - 01:04 | 1897644 lolmao500
lolmao500's picture

The ECB just have to buy them at 10 cents on the dollar.

Mon, 11/21/2011 - 01:08 | 1897653 michigan independant
michigan independant's picture

Vote your direction and destiny.

Mon, 11/21/2011 - 07:05 | 1897870 Zero Govt
Zero Govt's picture

Insolvency Street 

...it's a one-way road and the rush-hour is on, bit crowded at the mo and getting worse by the minute..

Jon Corzine created an unholy dash with a bottleneck piling up behind his crooked arse

Mon, 11/21/2011 - 01:13 | 1897658 jomama
jomama's picture

the problem with the euro defaulting on their debt is that the US is in just as bad if not worse shape than euros in terms of on balance sheet debt.  japan is in an artful holding pattern, but they are by far in the worst shape.  if europe defaults, how can the rest of world not?

man, what a clusterfuck.

Mon, 11/21/2011 - 01:33 | 1897682 RobotTrader
RobotTrader's picture

They must have dumped their "resource" stocks also.

No doubt, they piled all the proceeds into U.S. "Paper"

Mon, 11/21/2011 - 06:39 | 1897864 Vlad Tepid
Vlad Tepid's picture

Knowing the Japanese they jumped into JGB with both feet.

Mon, 11/21/2011 - 02:42 | 1897753 Temporalist
Temporalist's picture
Japan Exports Fall as China Sees World Slump

"Japanese exports dropped more than forecast in October, Singapore said its growth may slow to 1 percent next year and China signaled the global economy faces an extended slide."

http://www.bloomberg.com/news/2011-11-21/japanese-exports-decline-as-chi...

 

Mon, 11/21/2011 - 04:10 | 1897806 chindit13
chindit13's picture

Imagine you are an international bond manager.  It doesn't matter your nation.  You see the end of the year approaching.

Do you really want to be seen holding non-German Euro-debt over the reporting period?  Will you unload, just stop buying, or both?

Mon, 11/21/2011 - 04:18 | 1897813 lolmao500
lolmao500's picture

And they didn't even start selling FRENCH bonds...

Mon, 11/21/2011 - 04:32 | 1897821 lolmao500
lolmao500's picture
http://rt.com/usa/news/press-nypd-arrest-bloomberg-689/

 

Bloomberg's office admits to arresting journalists for covering OWS

New York is admitting that journalists that they credentialed are among those that were cuffed by cops. In a statement to the press released from Mayor Michael Bloomberg’s Office on Thursday, November 17, spokesperson Stu Loeser addressed the media about reports relating to the growing number of journalists who have been arrested by the NYPD during Occupy Wall Street protests, a now-international movement which began in Lower Manhattan two months to the day of Loeser’s memo.


Freedom, America style. I think China should impose a no-fly zone over NY and start bombing the dictatorship of Bloomberg. After all, Bloomberg changed the laws so he could run again for office... he's clearly a dictator who doesn't care about democracy. Not to mention, the NYPD, who violates human rights almost every day and commit war crimes against protesters time and time again and nobody is brought to justice...

Time for China or Russia to ``restore democracy`` in NY...

Mon, 11/21/2011 - 04:41 | 1897828 chindit13
chindit13's picture

If other Japanese privates follow Kokusai, there should be upward pressure on the yen, particularly JPYEUR.  This could continue all the way into Japan's FY end in March.  In the short term this will make Bass' Japan position look bad, but this is less a show of Japan strnegth than it is a desire for bond managers not to look like they are long the current whipping boy, Europe.  Other nations (Japan, US, UK, China) will have their chance at whipping boy status later.

Mon, 11/21/2011 - 04:53 | 1897836 PaperBear
PaperBear's picture
Anger Rises as MF Global Clients See Billions Frozen

"Three weeks after MF Global’s collapse, furious former customers are still fighting for access to billions of dollars as they question why as much as two-thirds of their money is still frozen."

"While authorities have touted the fact that they are returning 60 percent of the collateral and cash that had been frozen in the wake of the broker’s October 31 bankruptcy, a closer look shows that in fact only about 40 percent of customers’ total funds have been authorized for release so far."

"The remainder, more than $3 billion, ostensibly remains on hand to cover a shortfall originally estimated by MF Global to regulators at just $600 million."

"Because the bankruptcy trustee, regulators and exchanges have made no comment on the missing funds in weeks — and have given no information as to how much cash they are retaining — customers are left guessing exactly how much might end up in the creditors’ process of the bankruptcy."

Hey, Mr President Obama, how about some rule of law over here ?

Oh, you're too busy deciding who gets drone striked, eh ?

Mon, 11/21/2011 - 06:15 | 1897859 sabra1
sabra1's picture

truly, the end of the greenback:

http://www.cnbc.com/id/45383190

Mon, 11/21/2011 - 06:49 | 1897866 Zero Govt
Zero Govt's picture

"Just what prompted this ...loud slap in the face of the European confidence building exercise?"

Multi-Choice Answer:

a).  they did the Maths (and it wasn't looking good)

b).  the penny dropped (like a 1 ton lead weight)

c).  they woke up (and smelled the panic)

d).  all of the above (and then some)

Mon, 11/21/2011 - 08:04 | 1897901 BandGap
BandGap's picture

Don't understand why people don't think this collapse is happening. or that it is taking forever.  Neither is true. it has been happpening for months now.  As long as it takes to set all of this up, globally, it will take only slightly less time to come apart. It's just that many og the the commoners (led by the media and Gold Man-sacks) still see the emporer fully clothed. But that started to change months ago.

How many licks will it take to get to the center of this big lollipop?

Mon, 11/21/2011 - 08:12 | 1897910 youngman
youngman's picture

Wouldn´t it be nice to see on a daily basis who was selling...and who was buying.....and it what amounts....no smoke and mirrors..a transparent market...I can dream can´t I

Mon, 11/21/2011 - 09:43 | 1898058 drivenZ
drivenZ's picture

"Kokusai is merely the canary: expect everyone else to go ahead and dump the €741 billion in non-domestically held Italian (and then all other European sovereigns) bonds"

 

Kokusai is more like the tenth canary in the coal mine. 

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