Image credit: YouTube via https://www.smalljoys.tv/colonoscopy-doctors-what-to-say/
By Stan Szymanski
The Japanese 10 Year Government Bond became the Japanese ‘benchmark’ security in 1999.
What Is a Benchmark Bond?
A benchmark bond is a bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds such as on-the-run U.S. Treasuries. (Investopedia)
Or in the case of Japan, the 10 year JGB. And the JGB has not traded now for 3 DAYS.
Benchmark bonds are typically also what influences rates of other debt instruments in an economy such as credit cards and mortgages.
…"Japan's 10-year bonds have gotten expensive because yields on other notes have risen. No one is interested in trading such bonds," said Kazuhiko Sano, chief strategist at Tokai Tokyo Securities.
"The market in a very unusual situation." (Reuters via Yahoo Sports)…
In other words, the rest of the world is constantly repricing assets (these days, typically lower) given the terrible influence that inflation has imposed on the markets.
Up until now, Japan has maintained abnormally low interest rates through the monetization of their debt market via the Japanese government buying their own bonds.
…‘The BOJ has been spending trillions of yen to hold the ceiling on the 10-year Japanese government bond yield as it keeps an ultra-low rate policy to support the economy, going against the global tide of tightening to contain inflation.’… (Reuters via Yahoo Sports)
That brings us to today. What does it mean that the Japanese Government 10 year bonds have not traded for 3 days? The Government of Japan has literally had its head ‘up its anatomy’. Or to co-opt/paraphrase a novel saying of author, moviemaker, and Godly news purveyor Steve Quayle during the past week-the Japanese government are …’experiencing an eyewitness view to a colonoscopy’…
I believe that the Japanese have hit a point where no one wants to buy their ridiculously and unnaturally high priced bonds. The rest of the financial world is living in some semblance of reality and is experiencing the painful reality of lower prices for their securities. The emperors of the financial markets in Japan have just been told through the lower pricing of securities (bonds) elsewhere in the world that the emperor has no clothes.
I believe that when the JGB 10 Year eventually starts trading again, there will be a shock to that bonds’ price to substantially lower it which will cause reverberating subsequent shocks throughout Japan in its markets and its populace.
What effect will this have in the rest of the world? We will have to see just how profound the consequences are but Americas’ strongest ally in the East is clearly weakening. Japanese vehicle manufacturers Toyota, Nissan and Honda have all recently pulled out of Russia. This is a collective loss of billions of dollars. Toyota alone sold 110,000 vehicles in Putin’s country last year.
During the market crash of 1987 market makers for some stocks simply walked away from their telephones; there was a de facto absence of a market for certain securities. Today is the third day with the absence of a market for JGB 10 year bonds.
During the last two weeks the problem was in the British bond market. Now it is Japan. Who’s next? Just how close is a global crash or even a collapse?
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Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.
