Thursday, May 30, 2013

JGB Watch: Nikkei Dives by 5.15%, Yields Ease, Phisix Commiserates

Back to my JGB-Japan debt crisis watch. 

I pointed out yesterday that JGB yields reentered crash territory. At that time, Nikkei futures seem to have discounted this: The Japanese bellwether barely moved. But this was not to last.

By evening, Nikkei futures tumbled along with European markets.

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The Intraday chart shows the Nikkei in a gap down during the opening bell. Losses mounted until the close. The Nikkei closed at 13,589.03 down 5.15%

The dominant explanation by media of falling stocks has been due to the  Federal Reserve’s supposed “tapering”. If true, should the FED scale down, yields should rise further.

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But this has hardly been the issue last night. US 10 (TNX) and 30 (TYX) year treasuries eased as US stocks tumbled. UST 5 year (FVX) was marginally higher.

Such “tapering” has been unlikely the driver of the second bout of crashing Japanese stocks. The real force has been climbing JGB yields or Japan's crashing bond markets

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As of this writing JGB 10 year yields has been pushed back to .88%, that’s below the .92-.94 range yesterday. Yields of 5 year and 30 year bonds have also retraced.

If I am not mistaken the BoJ has set the .9% as the line in the sand for interventions.

The BoJ did intervene today. But I think that the scale of interventions has been more than what has been declared.

Importantly responding to the request of Japan’s Wall Street “to increase the frequency of its debt purchases”, the BoJ released its QE schedule for June.
1. Amount to be Purchased

Approximately 7+ trillion yen per month in principle. The Bank takes account of market conditions and conducts purchases in a flexible manner in order to ensure that the effects of monetary policy permeate the economy.

2. Bonds to be Purchased

Japanese government bonds with coupons (2-year bonds, 5-year bonds, 10-year  bonds, 20-year bonds, 30-year bonds, 40-year bonds, floating-rate bonds, and inflation-indexed bonds).
It is unclear if the BoJ will be able to cap their interventions, given the repeated attempt by the 10 year JGBs to break the 1% threshold.

I believe that the BoJ will be using up much of their programmed asset purchases just to stabilize the bond markets, which won’t be enough to cover her deficits.

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Nonetheless, Asian  markets seem to have empathized with the second series of Japan’s stock market crash. But their losses had been modest. 

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One surprising consoler of today's Japan’s crash has been the Philippine Phisix. (technistock.com)
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Many have been surprised at such selling violence despite the announcement that the Philippines posted the "best" economic growth in almost 3 years.

The mainstream overlooked that today's Phisix sympathy crash coincides with today’s spike in the yields of the Philippine 10 year bonds

This serves as an example of how interest sensitive stock markets are whether the Nikkei or the Phisix. 

And this also serves as warning to "best" economic growth underpinned by massive credit growth.


1 comment:

theyenguy said...

The great ZIRP unwind has commenced, as the monetary policies of the world central banks have finally resulted in turning “money good” investments bad, beginning first with the interest rate sensitive stocks, and with Asian banking stocks, FEFN.

Credit, that is trust, collapsed in May 2013, as is seen in the chart of Aggregate Credit, AGG, trading lower parabolically lower in value. The debt laden Electric Utilities, XLU, which were carry trade darlings, were left abandoned on the dance floor, as investors rushed to the exit doors, on a rapidly steepening 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, seen in the chart of the Steepner ETF, STPP, steepening, on the sharp rise in the Interest Rate on the US Yen Year Note, ^TNX. The interest rate sensitive, Mortgage REITS, REM, such as IVR, traded strongly lower in value. The pursuit of yield, which came with the blow off top in Liberalism’s grand finale rally, and which was in large part seigniorage, that is moneyness of the US Federal Reserve, exhausting, turning Retail REITS, O, NNN, GGP, Residential REITS, REZ, Small Cap Real Estate, ROOF, Premium REITS, KBWY, Real Estate, IYR, Global Real Estate, DRW, Industrial REITS, FNIO, and Chinese Real Estate, TAO, sharply lower. High Dividend Paying Australia Dividends, AUSE, traded lower on the sharp trade lower in the Australia Dollar, FXA, as well as the Australia Bank, WBK. Investors derisked out of high yielding Telecom Stocks, IST, Energy Partnerships, AMJ, EMLP, and Emerging Market Dividends, EDIV.


The souring of investment trust, has terminated Nation Investment, EFA, and Small Cap Nation Investment, IFSM, leaving Biotechnology, IBB, Clean Energy, PBD, SpinOffs, CSD, Automobile, CARZ, Pharmaceuticals, PJP, Semiconductors, XSD, Health Care Providers, IHF, Aerospace, PPA, Small Cap Pure Value, RZV, Retail, XRT, Gaming, BJK, Consumer Discretionary, IYC, Leveraged Buyouts, PSP, Global Consumer Discretionary, RXI, Internet Retail, FDN, Global Industrial Producers, FXR, Industrial Producers, XLI, Small Cap Industrials, PSCI, US Stocks, VTI, US Infrastructure, PKB, Homebuilders, ITB, as well as Small Cap Energy, PSCE, Energy, XLE, XOP, at or near their market tops.


During May 2013, Jesus Christ, acting in the administrative plan of God for the fullness and completion of the age of Liberalism, Ephesians 1:10, produced Peak Democratic Freedom, Peak Nation State Sovereignty, Peak Seigniorage, Peak Money, VT, Peak Currencies, DBV, CEW, Peak Credit, AGG, and Peak Clientelism and Dependency as well; all of which came through what Doug Noland terms wildcat finance, that is through speculative leveraged, toxic credit, carry trade investment, producing Peak Peace and Peak Prosperity, all based on ever increasing moral hazard, and coming with great libertine and ponerous living.

Jesus Christ is working in dispensation, Ephesians 1:10, to pivot the old economy to the new economy; that from 1) from the paradigm of liberalism to the paradigm of authoritarianism, 2) from the fiat money system to the diktat money system, and 3) from the banker regime of US Dollar hegemony to the beast regime of regional governance, totalitarian collectivism, debt servitude and austerity, as foretold in Bible Prophecy of Revelation 13:1-4, also known as the ten toed kingdom of regional governance, as presented in Daniel 2:25-45.