Disappointing fiscal stimulus, loss of faith in The BoJ, and increasingly headless-chicken policymakers has sparked a sudden and severe rush for the exits from Japan's government bond markets. 10Y JGB yields exploded from -30bps to almost 0bps in the last 4 days - the biggest crash in prices in over 3 years. This bloodbath is roiling the rest of the global developed bond market with Bund yield spiking (+12bps in last 2 days, almost back to 0), Swiss, UK, and Danish bonds are all blowing out, and Treasury yields up 14bps since Friday alone.
As the world's third largest economy approved 13.5 trillion yen in fiscal measures on Tuesday, market sentiment remained bruised by the Bank of Japan's decision last week to ramp up its bond-buying scheme by less than many investors has expected. A shift in policy towards fiscal stimulus from monetary easing is seen as having less direct impact on asset prices.
Japan's 10-year bond yields rose more than 10 basis points to a 4-1/2-month high of minus 0.03 percent after tepid demand was seen for a 2.4 trillion yen ($23.42 billion) 10-year auction.
Euro zone bond yields were hauled higher by Japanese equivalents on Tuesday after a weak debt auction underscored investor disappointment at Tokyo's apparent shift from monetary easing towards fiscal stimulus.
And Treasury yields are surging in the face of a dropping stock market...
With the Treasury curve steepening dramatically on the week...
This Japan's worst bond swing in 3 years, and US' Treasyr yield spike in the worst since Aug 2015.. with the biggest curve steepening since 2011.
The question is - who catches down to whom?