JGB Watch: Stable Instability: Japan’s Nikkei, Philippine Phisix, Thailand’s SET and China’s Shanghai Nosedives

Back to my JGB-Japan debt crisis watch.

Bank of Japan (BoJ) board member Sayuri Shirai, a former IMF economist said today that bond yields are expected to stabilize overtime, where it would be “natural and desirable for bond yields to gradually rise in the next two to three years on prospects of an economic recovery and rising prices.”

The long term essentially represents an accretion of short term actions.

Based on today or since the Kuroda announcement to double monetary base in April, there has been hardly any signs of stability. To the contrary, the volatility in Japan’s financial markets appear to be accelerating or intensifying.

Early today 10 year JGB yields had been pushed back to below .8% for the first time in nearly a month. But this wasn’t meant to last, as yields bounced back near to yesterday’s anxiety point.

I guess I spoke to soon, yesterday I noted that JGB reached levels that previously caused a crash in Japan’s stock market but didn't. 

Well the crash did happen belatedly today. 

Japan’s major benchmark the Nikkei 225 tanked by 6.35% to officially close at bear market territory, and gave up the entire 4.9% rebound last Monday as the yen rose.

BoJ’s policies so far represents stable instability, or what seems stable or constant today has been high volatility. 

Developments in Japan’s may not be the entire culprit, yesterday’s new highs for 30 (top) and 10 (bottom) US Treasury yields compounded the stampede out of Asian stock markets.

Heck today was a bloodbath in Asian stock markets

Aside from the Nikkei, Thailand, China  and most especially the Philippines collapsed. The rest of Asia were in red.

Mainstream media predicted that today would be bargain hunting. (chart from technistock.com)

But as I warned a few days ago:

“Bargain” means cheap, hence bargain hunting is a loaded word underpinning a bullish bias. Unfortunately, “bargain hunting” even became more of a bargain today. And if the current selloffs intensifies, bargain hunting will transpose into catching of falling knives.

Bargain hunting became a flurry of falling knives.

It’s amazing how lost or confused or clueless mainstream experts have been with the recent crash of ASEAN stocks. All they can say is that this signifies foreign exodus, has been a regional dynamic and a result of the Fed’s tapering talk.

They have mistakenly been reading effects as the cause.

Hardly anyone realizes that such has been about rioting bond markets and the return of bond vigilantes or of markets indicating of a rise in interest rates. Rising rates in a deeply leveraged or highly indebted financial world would mean a bubble bust.

The actions by Indonesia’s central bank today validates my point.

From Bloomberg:

Indonesia’s central bank unexpectedly raised its key interest rate for the first time since 2011 as Governor Agus Martowardojo accelerates efforts to boost confidence in the currency and cool inflation expectations.

Bank Indonesia policy makers increased the reference rate by a quarter of a percentage point to 6 percent, the central bank said in Jakarta today. All 19 economists surveyed by Bloomberg News expected no change.

Zero mainstream experts saw this coming.

It’s a black swan day for them. Not for us.