Oops, JGBs Yields Edge Higher Again

I am in a Japan debt crisis watch mode. So my focus on JGBs.

Japan’s stock market markedly rallied today, the benchmark Nikkei close 1.2% higher today. Most Asian markets have been up today, some are still trading as of this writing.

Chart from Bloomberg

But despite the stock market rally, Japan’s bond markets remain queasy as investors failed to show up at the Japanese government’s 20 year bond offering today.

From Reuters (bold mine) 

Japanese government bonds skidded on Tuesday, with the benchmark yield moving back toward last week's 13-month high, after a 20-year sale disappointed some investors and a Bank of Japan official offered no specific steps on market operations.

BOJ board member Ryuzo Miyao told a news conference on Tuesday it was vital to keep long- and short-term interest rates on a stable path.

His remarks offered little in the way of concrete reassurance to a market left reeling by the central bank's massive stimulus scheme unveiled on April 4, under which it is buying a monthly amount equivalent to 70 percent of JGB issuance.

Miyao's comments, combined with a recovery in recently languishing Japanese shares, added to the pallor cast by the downbeat auction outcome.

Yields rose across the JGB curve with 5 and 10 years rising most at an even 5 bps. Meanwhile, the yields of 30 years inched up by 2 bps and the 2 year added 1 bp.

With the 10 year at .87%, will the 1% mark be tested again in the coming days? If so how will financial markets react? Will global markets interpret this as just hunky dory or topsy turvy?

Yes, things are getting to be a lot interesting.