Japanese Government Bond Yields Collapse To Record Lows

Amid a strong 30 year auction overnight, long-dated Japanese Government Bond yields utterly collapsed. 30Y yields dropped 21bps - the biggest absolute drop in over 3 years and biggest percentage drop ever - to a record low 47bps. Since Kuroda unleashed NIRP, the entire JGB has been crushed and last night's rush for long duration debt (well at least there is some yield there?) has flattened the curve to record lows. For context, Japan's 30Y yield is now below US 2Y yield...

Nothing to see here...

 

As Reuters reports,

Japanese government bond yields tumbled to fresh record lows on Tuesday after a firm 30-year auction fuelled a rally for debt instruments that still offer positive yields, which have become scarce under the Bank of Japan's negative interest rate policy.

 

Weaker Tokyo stocks also increased the allure of the bond market, with the Nikkei falling to a one-week low.

 

The benchmark 10-year yield fell to a new record low of minus 0.100 percent.

 

The 30-year yield plummeted 21 basis points, the biggest one-day fall in three years, to a life-time trough of 0.470 percent.

 

The rally by super long JGBs was triggered by strong results in a 30-year auction, underlining solid investor demand for the maturities that offer positive yields but also entailing greater duration risk.

 

"There were some concerns that the 30-year auction may not garner sufficient demand and the firm results prompted a rally in the bond futures. The auction results show domestic banks' JGB buying is extending towards the super longs," said a dealer at a Japanese financial institution.

As the entire JGB curve is now negative to 13 years...

 

Crashing the 30Y yield below the UST 2Y for the first time since pre-Lehman...

 

Which appears to be sending Japanese banks into USTreasuries out-curve...

 

This will not end well.

 

Charts: Bloomberg