"All That's Left Is To Fade Away & Die" - Japanese Bond Volatility Crashes To Record Low

The world’s second-largest government bond market after the U.S., with some $9 trillion in outstanding debt, is dead, slayed by the constant repression of a central-bank clinging to any smoke and mirrors it can monetize to keep the delusion of normalcy alive.

As The Wall Street Journal reports, the daily volume of government-bond trading is often measured these days not in trillions or billions, but in millions of dollars - and, as we previously detailed, sometimes just with a single digit, zero.

The central bank is swallowing up so much of the new bond issuance that traders say there is just not much to do.

And as Bloomberg reports, a gauge of expected volatility in Japanese bond futures slid to a record low today as speculation the central bank will adjust its target for 10-year yields waned.

Earlier this year the market was betting the Bank of Japan would tolerate a wider deviation in benchmark yields away from zero, but as the yen rallied this hope has been dashed, said Akio Kato, general manager of trading at Mitsubishi UFJ Kokusai Asset Management Co. in Tokyo.

Longer-term, the divergence is even more notable - bond risk and stock risk have shifted regimes...

Bond volatility fell to 1.27 percent, the lowest in data compiled by Bloomberg starting in 2008.

“It’s becoming like a deserted village. All that’s left is for us to fade away and die,” said Jun Fukashiro, who oversees bond investments for Sumitomo Mitsui Asset Management Co. The 53-year-old asset manager, who has been involved in government bond investing or trading since 1990, says that when he goes out with people in the business, he just sees the old faces, “the ones who are headed for retirement pretty soon.”

The Bank of Japan already owns 41% of the Japanese government bond market and is buying hundreds of billions of dollars more each year to pump cash into the financial system and ensure that plenty of low-interest funds are available for borrowers.

WSJ reports that Tadashi Matsukawa, who heads the bond-trading unit at the Tokyo office of New York-based asset manager PineBridge Investments, said he used to trade Japanese government bonds every day before the Bank of Japan pinned the yield near zero. Now it is every other day, he said.

Mr. Matsukawa said he misses the excitement of a more active market. “There is limited space for us to move around, less opportunity for us to make money.”

“There is only one trade in town now that makes money,” says Naka Matsuzawa, rates specialist with Nomura Securities - that's when brokerages that have purchased bonds at Ministry of Finance auctions resell the bonds to the Bank of Japan, which isn’t allowed to buy them directly from the government.

At some point, he said, pressure for bond yields to rise may build up, and there won’t be many people left who know how to handle such volatility.

“A big change will probably take place once everyone’s gone,” he said. “That’s always the case in markets.”

As more market participants throw in the towel on a rigged, centrally planned market, the result will - no could - be a further loss of market function, and a guaranteed crash once the BOJ and other central banks pull out (which is why they can't).

As the Nikkei politely concluded, "if the bond and money markets lose their ability to price credit based on future interest rate expectations and supply and demand, the risk of sudden rate volatility from external shocks like a global financial crisis will rise."


weliveinamatrix Thu, 04/12/2018 - 14:58 Permalink

 Things will crash when "they" want it to, and no way of knowing the time...And "they" will do it on "their" terms..Altho, through a bit of study, I do think a "reset" is coming in the not so distant future...How it will work out, I dont know...But it does seem the way they do things....destroy a system and rebuild another...It is very difficult to understand what is in their minds for the future but their are signs...I am simply tired of trying to learn and figure out their signs...exhausted...maybe that is part of their plan, to bring us to total exhaustion.

weliveinamatrix Bill of Rights Thu, 04/12/2018 - 15:23 Permalink

It is a world event now...IMO, 90% of countries want to be part of the NWO in total control. Its all about pecking order maybe. I also believe they do not want the fiat dollars anymore. They cannot control it. Everything MUST be digital. ie: cant buy or sell without the "mark"....it also seems that many countries are not happy with this "dollar" control...Your point is taken seriously, but I think its much bigger than that. For instance, what about the SDR? China is now involved...and large countries buying/selling now in other currencies other than the dollar...As far as ignorant Americans, you are totally on point tho.

In reply to by Bill of Rights

Bill of Rights weliveinamatrix Thu, 04/12/2018 - 15:29 Permalink

SDR is already in circulation, yes I TOO read https://philosophyofmetrics.com/ and that has had little impact on our personal daily lives. Americans are Stupid smart, never mind the 3% ( if we are lucky ) that read these pages. 320 million people out there in the real world not all are oblivious to whats going on in the world.


But crash the system ( Again ) na I doubt it, there's nothing in it for them this time around. Remember, these pricks stole Trillions of dollars so they can keep this machine well oiled for quiet a long time....

In reply to by weliveinamatrix

mosfet Thu, 04/12/2018 - 15:17 Permalink

They bought all the bonds and stocks and the predictable result was stagnation.  They'll get more than enough inflation once they start printing to put cash directly in peoples pockets.  Hoping to get some bargains on crypto before this starts and the panic out of Yen begins.

What do you think will happen to Gold once USDJPY starts rising rapidly?  What do you think will happen to Gold once traders realize that the Yen is no longer an alternative safe haven to Gold?  How does Japan NOT go into hyperinflation?  How does this NOT massively affect Euro and US financial debt instruments?

U. Sinclair Thu, 04/12/2018 - 16:26 Permalink

All the central banks in the world play the same game.
Rather sooner than later a real crisis will emerge somewhere.
The financial system will go haywire then.
Buckle up for the most strangest times in history because most of the people in the Western world are completely ignorant about austerity and poverty.
Enjoy the last days in the sun...

Cutter Thu, 04/12/2018 - 18:04 Permalink

To accept what is happening in Japan, you have to accept that the Capitalist creation of markets is superfluous to Capitalism.  That Capitalism can survive just fine with no markets.  That state control of "markets" is Capitalism.

This is fantasy.  The destruction of Japan's markets is the destruction of Japanese Capitalism.  Japan is somewhere in the nether world between capitalist and communist/socialist, but with every new bond purchase they pound another nail into their capitalist past.  

Let it Go Thu, 04/12/2018 - 18:40 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.

  http://The Yen And Its Failure To Fail.html

not a yahoo Sun, 04/15/2018 - 01:09 Permalink

Seriously the only thing that baffles me is how are resources still this cheap, in usd, yen, or chinese, or euro, when all these currencies have monetized the shit out of themselves