On Friday morning, after the humiliating for the BOJ halt of the ¥1 quadrillion Japanese government bond market [6], the second largest in the entire world due to unprecedented 13-sigma volatility, [7]we joked that as a result of the central bank's desperation, it has now made trillions in the formerly world's "safest" security trade like a penny stock.
Suga says is closely watching bond market movements. He must be referring to the JGB pennystock which was halted overnight
— zerohedge (@zerohedge) April 5, 2013 [8]
It appears our joke was not far off the mark as a few hours ago, in advance of the Sunday reopening of the JGB, at least one broker has decided to prepare for another record vol session by completely eliminating intraday margins and thus avoid the possibility of even more limit up/down crashes as a result of margin stops being hit and starting a self-reinforcing feedback loop of even more buying or selling.
From Interactive Brokers:
[9]
Of course, this includes not only JGBs, but equities and FX too. But the message is loud and clear.
Remember when everyone looked with apprehension at EURUSD levels as Sunday afternoon trading reopened? That was so 2012. Now it is all about the opening levels of the 10 Year JGB. And once the GETCO "momentum ignition" algos sniff out the persistent volatility that is now a staple of the Japanese bond market, expect 100% intraday swings in the second biggest sovereign bond market to become the norm. Which may be just what the BOJ wants: after all why bother with the pesky market at all - just halt it indefinitely and have a group of failed economists set the daily price fixing themselves. What can possibly go wrong?