Japan Spirals into Bankruptcy?

Hum,

if Japanese inflation is at +0,8 yoy, it is utterly ridiculous to see 10yr JGB yields at 0.64%.

There is only one reasonable explanation why DOMESTIC institutional investors are not dumping government bonds. They are all sitting in the same boat. If a massive sell off starts my guess is the whole financial system in Japan will go down.

Foreigners shouldn´t be on the hook at all - as we all know that more than 90% of the paper is held by Japanese institutions.

Why some hedgies are trying to short the JGB market is a mystery. The domestic players are just waiting to break you into pieces.

It´s much easier to earn some alpha via currency bets.

The carry trade and JPY weakness are just the way to go. And much more liquid than the rigid JGB futures markets....
 
Quote from Nighthawk:
Hum,

if Japanese inflation is at +0,8 yoy, it is utterly ridiculous to see 10yr JGB yields at 0.64%.
More...
Humm,

What if the next print shows Japanese inflation going back down to -0.2% YoY? Would 0.64% JGB yield seem utterly ridiculous?

Maybe a more reasonable explanation for the "non-dumping" of JGBs is that the domestic investors just don't believe that positive inflation is there to stay in Japan?
 
Quote from Martinghoul:

Humm,

What if the next print shows Japanese inflation going back down to -0.2% YoY? Would 0.64% JGB yield seem utterly ridiculous?

Maybe a more reasonable explanation for the "non-dumping" of JGBs is that the domestic investors just don't believe that positive inflation is there to stay in Japan?
More...

Actually, core consumer prices are still "deflationary". Your hypothesis might be supported by the fact that salary and wages in Japan didn´t rise as expected by the government. Only bonus payments added some juice to selected industry´s paychecks.

Whatever the predominent reasons, from a trader´s point of view, there is more juice in currency markets than in JGB´s.
 
Japan never really paid for the war. I don't mean that in some sort or moralistic way or as penance but strictly in a financial sense. The did not go into the war as a modern industrial nation yet even though they came out in rather rough shape they decided to leap into the race on borrowed money. I know they borrowed it locally and, in many ways that makes it a different equation yet it does not change the equation in some basic ways; they became an industrial powerhouse within 25 years of losing a "big" war and borrowed gargantuan sums to accomplish that.

They have now spent many years mismanaging the consequences of their industrialization and made the hangover worse. These guys do not know how to write anything down or off the books. I suspect we are seeing the Chinese unable to do it as well. Culture counts and Asian viewpoints make things we take for granted impossible to do. I believe that when the big bang comes it will be very big but a lot of capital has been lost predicting when that will be.
 
Quote from Nighthawk:

Whatever the predominent reasons, from a trader´s point of view, there is more juice in currency markets than in JGB´s.
More...
I am in full 100% agreement with you... JPY and maybe NKY are where it's at.
 
Quote from Nighthawk:


Foreigners shouldn´t be on the hook at all - as we all know that more than 90% of the paper is held by Japanese institutions.

/B]
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And the institutions are held by foreigners, which are then on the hook.:D
 
Why more juice in JPY than in JGBs? If JPY is to weaken substantially...won't it need some real-money sellers behind it? What are they going to sell?

Don't really have my own opinion on this yet...just trying to think things through.
 
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