Panicked BOJ Unleashes Bond Buying Bazooka: Offers To Buy Unlimited 10Y JGBs At 0.11%

During this morning's bond rout when a poor French auction sparked a high-volume selloff in German Bunds which also hit Japanese JGBs before slamming US TSYs, Goldman said that "with 10Y JGBs closing at 0.095 and getting hit at 10bp intraday, focus will be on how the BOJ will react tomorrow [i.e. now]. Opinions seem pretty split with some expecting an increase in purchase size in the 5-10 bucket, while others feel that the BOJ will let the 10Y run loose given the current sell off is more fundamental than event driven. With BOJ behind buying pace for 80tn reference anyway, personally I feel it doesn't hurt the BOJ to remind market of their presence."

Goldman was right: the BOJ, panicking after the overnight bond rout, not only reminded markets of its presence, but did so in dramatic fashion when it first boosted the amount of JGBs bought in the 5-10 year bucket from JPY 450BN to JPY 500 BN, and then for good measure unleashed the QQEWYC bazooka, announcing it would purchase an unlimited amount of 10Y JGBs at 0.11%, just a fraction above the BOJ's 0.10% line in the sand, only the second time it has done so in 2017 since February.

In immediate reaction, the benchmark Japanese TSY, which was trading north of 0.105% and flirting with 0.11%, promptly slid back to 0.095% now that it has become clear that all the hawkish posturing by central banks was just that.

Japanese market were relieved with the Topix paring losses to 0.3%, or 1,611.52 as of 10:23am in Tokyo, down from a drop as big as 0.7%, same as the Nikkei, which had dropped 0.7% earlier, then trimming losses by more than half, while the Yen, after trading at 113.250, immediately weakened by 25 pips to 113.50.

And so, when push had again come to shove, the BOJ - the central bank which owns 100% of Japan's GDP in bond terms and can't afford any sharp, or not so sharp, moves higher in yields - admitted that all the recent warnings and talk about higher rates was nothing but.


Clock Crasher Thu, 07/06/2017 - 21:43 Permalink

Peter Schiff said it. Once you set down the path of QE you can never go back. When QE4 hits the US markets anualzied in the trillions you might want to have been long phyz and miners. Just a hunch. Only question is when the dollar is minus one or two percent for the day on a regular basis will stocks correlate or inverse. Wont surprise me if stocks preform inverserly to a falling dollar and gap and run and gap and run and gap and run to the moon with cash money... I mean gold out preforming and silver out preforming gold. lotto dreams. keep the dream alive. 

Quinvarius Thu, 07/06/2017 - 21:47 Permalink

This central banker bond buying farce is hilarious.  Are we actually still pretending we need "bonds" as a vehicle to print money and give it to the government?    

Jtrillian Thu, 07/06/2017 - 22:13 Permalink

I will gladly pay you Tuesday for a hamburger today. BOJ has destroyed any hope for a future.  Central banks are a plague on the Earth.  When they behave in this manner there is no more market... only the central bank. If the people of Japan were smart, they would abandon the YEN asap. 

Let it Go Fri, 07/07/2017 - 00:00 Permalink

The myth promoted by the central banks that a major currency cannot fail is accepted as fact by many people however, the rapid demise of either the yen or the euro is all that will be needed to reveal the truth. When a major currency fails it will remind people everywhere that our system of fiat money is held together only by faith in the system and a prayer.Japan's public debt, which stands at around 250% of its GDP is the highest in the industrialized world. In the future Japan's debt can only be addressed by printing more money and debasing the yen. The article below explores how when Japan crumbles it will be felt across the world.

MEFOBILLS Let it Go Fri, 07/07/2017 - 01:39 Permalink Bank of Japan continues to aggressively buy its government’s debt. An interest-free debt owed to oneself that is rolled over from year to year is effectively void – a debt “jubilee.” As noted by fund manager Eric Lonergan in a February 2017 article:

The Bank of Japan is in the process of owning most of the outstanding government debt of Japan (it currently owns around 40%). BoJ holdings are part of the consolidated government balance sheet. So its holdings are in fact the accounting equivalent of a debt cancellation. If I buy back my own mortgage, I don’t have a mortgage.

Japan has a record low inflation rate of .02 percent. That’s not 2 percent, the Fed’s target inflation rate, but 1/100th of 2 percent – almost zero. Japan also has an unemployment rate that is at a 22-year low of 2.8%and the yen was up nearly 6% for the year against the dollar as of April 2017.

In reply to by Let it Go

wonger Fri, 07/07/2017 - 03:46 Permalink

If the BOJ was really going to cap the 10 year rate at 0.11% it would be trading -5% by now, so sit back and watch it rocket up through 0.11%!

bombdog Fri, 07/07/2017 - 04:16 Permalink

Am I the only one who thinks that an actual real "Crack up Boom" really will appear at some point as Ludwig von Mises predicted? My only wish is I could go back and buy S+P at 666 and I'd have had more fun with this.