The art of economics consists in looking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups—Henry Hazlitt
Wednesday, May 29, 2013
JGB Watch: 10 Year Yields Reenters Crash Zone
Tuesday, May 28, 2013
Oops, JGBs Yields Edge Higher Again
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.
Thursday, May 23, 2013
Super Abenomics: Japan’s Nikkei Crashes on Rioting Japanese Government Bonds
Japanese government bonds fell, with 10-year rates touching 1 percent for the first time in a year, on speculation the Federal Reserve will curb stimulus and the Bank of Japan will tolerate an increase in yields.Japan’s five-year note rate matched the highest in two years after Fed Chairman Ben S. Bernanke said yesterday the central bank may trim bond purchases if policy makers see indications of sustained economic growth. The BOJ injected 2 trillion yen ($19.4 billion) into the financial system to stem volatility following a circuit breaker in JGB futures trading.
The Bank of Japan injected 2 trillion yen ($19.4 billion) into the financial system today to stem volatility, as benchmark JGB yields swayed the most since the day after the central bank announced unprecedented bond buying.
Abenomics operates in an incorrigible self-contradiction: Abenomics has been designed to produce substantial price inflation but expects interest rates at permanently zero bound. Such two variables are like polar opposites. Thus expectations for their harmonious combination are founded on whims rather from economic reality.
Japan’s Topix index tumbled almost 7 percent, the most since the aftermath of the March 2011 tsunami and nuclear disaster, as financial companies plunged amid rising bond yields. The rout triggered a halt in Nikkei 225 Stock Average futures trading in Osaka.Consumer lenders lost 11 percent to lead declines among the Topix (TPX)’s 33 industries. Mitsubishi Estate Co., the country’s biggest developer, slid 9.3 percent. Mitsubishi Motor Corp. dropped 14 percent, falling a second day after advancing more than 50 percent in the previous three days. Tokyo Electric Power Co. plunged 13 percent.
A measure of share swings surged to its highest in two years. The Topix’s 50-day volatility rose to 28.8, the highest since May 2011, according to data compiled by Bloomberg.The Topix and Nikkei 225 Stock Average have risen more than 40 percent this year, outperforming all major equity indexes amid unprecedented Bank of Japan easing. The Topix trades at about 1.4 times book value, compared with about 2.5 for the Standard & Poor’s 500 Index and 1.7 for the Stoxx Europe 600 Index.
Wednesday, December 07, 2011
Japan to Offer Gold Coins to Debt Investors
From the Bloomberg/Businessweek
Japanese Finance Minister Jun Azumi will be rewarding investors who buy reconstruction bonds with half an ounce of gold, an added incentive that could boost the return by nearly six times.
Individual investors who purchase more than 10 million yen ($129,000) in the debt with a 0.05 percent return and keep it for three years will receive a gold commemorative coin weighing 15.6 grams (0.55 ounces), the Finance Ministry said in Tokyo today, worth about $948 based on current prices for the precious metal.
The offer suggests the return could be boosted to 89,000 yen should gold prices remain at current levels, more than the approximate 15,000 yen one would receive from the bond. Azumi, whose hometown was devastated by the March 11 disaster, said today he bought 1 million yen of the debt to support rebuilding efforts from the earthquake and tsunami.
This can be viewed as tokenism—reward for not only buying government debt (thereby keeping politicians happy) but for also keeping them.
Even at the margins, such symbolism may be seen as enhancing gold’s image as safehaven asset. Yet this could serve as more evidence where gold will likely be used as prospective collateral for government/corporate debt issuance.
Lastly, with the rate of currency debauchery being undertaken by global central backs which includes the Bank of Japan, it would not be surprising that the current price differential of the gold 15.6 grams coin ($948) and the 10 million yen debt ($129,000) will most likely narrow overtime.
Chart from ycharts.com
Prices of gold based on the yen has more than doubled over a decade.