Visualizing The 'Orderly' Japanese Bond Market

Overnight, Japanese government bond (JGB) markets had yet another turbulent trading session. Despite reassurances from Kuroda that the bond-buying plan would continue as expected, JGB prices (and even more so yields) smashed around in a huge relative range. The market is already extremely anxious of this disorderly behavior as Japanese interest rate implied volatility (used to hedge against - or bet on - disorderly markets) have spiked to ten-year highs (and to their 3rd highest ever). This is no surprise as the following charts show, the realized volatility in this market is at generational extremes.

Realized volatility has exploded...

 

as has Japanese interest rate implied volatility...

 

as daily ranges are 4 to 8 times ten year averages...

 

So we are one week into the biggest and most experimental monetization scheme ever in history and the quadrillion Yen bond market is in total disarray. What could go wrong?