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Chaos In JGB Land Sparks Global Bond Rout After Margin Calls, ‘Horrific’ Auction In Japan
The moribund Japanese government bond market is coming to life, and that's not necessarily a good thing depending on your perspective.
JGB futures plunged the most in years on Tuesday following a dastardly 10-year auction that drew the lowest bid-to-cover since 2016.
The tumble in futures (which logged the largest one-day drop since August 2, 2016) was made worse by the triggering of emergency margin calls. Yields surged by as much as 7bps at one juncture to -0.145%, the "highest" (which is al
I’m going to admit that I’m one of your readers who needs a little remedial help on this one. Help. If the yield rose because of reduced purchases by Japanese buyers of 10 year bonds, and those buyers will instead purchase foreign bonds, shouldn’t that increase demand for US and European 10 year bonds?? Or is the idea that the demand from Japan isn’t enough to increase developed nation bond prices, but that US and European banks and pension funds will also reduce purchases of long term bonds?? But if all these players stop purchasing long term bonds, where will the money go?? And, isn’t the steeper demand curve supposed to help a few players?? For example, shouldn’t it make it a bit easier for Japanese banks to make a few bucks?? But it looks like the Japanese banks are down today. Finally, I would think on the day the new sales tax goes into effect, the Japanese bond market would be signaling more fear of deflation, and the steeper curve might be a relief to a few folks in Japan. I may be the only confused reader, but would appreciate a little more explanation.
me too