“It’s Almost Impossible To Buy”: Japanese Bond Crash, Margin Call Send Shockwaves Around The Globe
- “It’s Almost Impossible To Buy”: Japanese Bond Crash, Margin Call Send Shockwaves Around The Globe
by Tyler Durden, https://www.zerohedge.com/
For a dramatic preview of what will happen in the blink of an eye to all those record low interest rates without the backstop of central banks and ravenous pension fund buying, look no further than what happened in Japan overnight where bond futures suffered the biggest one-day crash since August 2, 2016, sliding as much as 0.97 yen to 154.05, and triggering margin calls for investors after the worst 10-year debt auction in three years.
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More ominously, once the rout started it quickly spread outside of Japan, because as yields jumped, the sell-off spilled into US Treasuries and European debt.
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There were three things behind the swift collapse: the first catalyst was the Bank of Japan’s Monday decision to slash bond purchases in October for the four major maturity buckets in order to steepen the curve and avoid further flattening which Kuroda has repeatedly expressed concern about in the past; the BOJ had indicated it may even stop buying debt of more than 25 years. It also sought to anchor yields from the one-to-three year zone by raising purchases in a regular operation earlier in the day and lifting the purchase band for the sector in October.
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