Japanese Bond Implied Volatility Spikes To 10Y High; Stocks Drop First Day In Last 8

It's been a long night for the Japanese markets. As Abe and Kuroda awoke stunned that JPY had not broken above 100, things went from bad to worse as USDJPY slid 60 pips from the last US day-session. The Japanese equity market is following the FX pair in its hyper-correlated way as TOPIX is struggling with its first loss in eight days. The Japanese bond market is not doing well either, despite the BoJ's JPY2.5 trillion monetization today. 7-year to 30-year JGBs are 5-7bps higher in yield (3-4 times the average move) and JGB Futures are suffering significantly with the 10Y down over almost a point - within a tick of triggering the TSE's circuit-breaker for the 5th time in 6 days. While everything points to a 'disorderly' market (especially in bonds), we can rest assured they are on it:

  • *KURODA CONFIDENT BOJ CAN BUY BONDS AS PLEDGED

Add to that the fact that JGB implied vols just hit a 10-year high and it seems all is well in the land of the setting sun once again.

 

Three concerted JPY short-covering attempts so far in the last 24 hours...

 

 

Stocks down for the first time in 8 days...

 

JGB realized daily ranges remain astronomical in the context of the last ten years of trading...

 

and JGB Futures gapped lower (in price) after the monetization getting within 5c of the 5th halt in 6 days...

 

Charts: Bloomberg