• Tag Archives BOJ
  • Japan’s Bond Market Grinds To A Halt: “We’ll Go Days When No Bonds Trade Hands

    The Bank of Japan may or may not be tapering, but that may soon be moot because by the time Kuroda decides whether he will buy less bonds, the bond market may no longer work.
    As the Nikkei reports, while the Japanese central bank ponders its next step, the Japanese rates market has been getting “Ice-9ed” and increasingly paralyzed, as yields on newly issued 10-year Japanese government bonds remained flat for seven straight sessions through Friday while the BOJ continued its efforts to keep long-term interest rates around zero.
    The 10-year JGB yield again closed at 0.055%, where it has been stuck since June 15m and according to data from Nikkei affiliate QUICK, this marks the longest period of stagnation since 1994,

    This post was published at Zero Hedge on Jun 25, 2017.


  • JPMorgan’s Head Quant Doubles Down On His “Market Turmoil” Forecast: Here’s Why

    After getting virtually every market inflection point in 2015, and early 2016, so far 2017 has not been Marko Kolanovic’s year, whose increasingly more bearish forecasts have so far been foiled repeatedly by the market, and the same systematic traders that he periodically warns about. As a reminder, his most recent warning came last week, when he cautioned that even a modest rebound in VIX could lead to dramatic losses for vol sellers. As a reminder, here is the punchline from his latest note:
    Days like May 17th and similar events “bring substantial risk for short volatility strategies. Given the low starting point of the VIX, these strategies are at risk of catastrophic losses. For some strategies, this would happen if the VIX increases from ~10 to only ~20 (not far from the historical average level for VIX). While historically such an increase never happened, we think that this time may be different and sudden increases of that magnitude are possible. One scenario would be of e.g. VIX increasing from ~10 to ~15, followed by a collapse in liquidity given the market’s knowledge that certain structures need to cover short positions. So in light of a market that refuses to post even the smallest of drawdowns (we are not sure if the words “selling”, “correction” or “crash” have been made illegal yet), has Kolanovic thrown in the towel and declared smooth seas ahead? To the contrary: in a note released late last night, he echoes warnings made recently by both Citi and BofA, and predicts that receding monetary accommodation from ECB and BOJ will likely lead to “market turmoil, and a rise in volatility and tail risks” and just in case there is some confusion, he reiterates what he said last week, namely that the “key risk of option selling programs is market crash risk.”

    This post was published at Zero Hedge on Jun 23, 2017.


  • One “Data-Dependent” Trader Is “Looking At The Bounce In Gold As Sentiment Indicator”

    As US (and global) economic data has disappointed at a rate not seen since Bernanke unleashed Operation Twist and QE3, so traders are shrugging off declining earnings expectations and weak macro data in favor of the continued belief that The Fed (or ECB or BoJ or BoE or PBOC or SNB) has their back. So, as former fund manager Richard Breslow notes below, it appears the ‘data’ that everyone is ‘dependent’ upon is very much in the eye of the beholder…
    Via Bloomberg,
    We’re all data-dependent. It’s not just the central banks that hide behind that aphorism. Traders and investors operate that way too. It’s just that data is a very poorly defined word and concept. The dictionary speaks of facts and specifics. But in reality it includes, biases, positions and a whole lot of other subjective factors. You and I can, quite properly, look at the same data and react differently.
    So while it’s a universally held concept that is proudly used to denote dispassionate rationality, it’s in fact a meaningless one.

    This post was published at Zero Hedge on Jun 23, 2017.


  • “The Next Leg Is Clearly Lower” – Global Excess Liquidity Collapses

    First it was Citi’s Hans Lorenzen warning about the threat to growth and global risk assets as a result of the upcoming slowdown in global central bank balance sheet growth. Then, yesterday, it was Matt King’s turn to caution that “the Fed’s hawkishness this week adds to the likelihood that in markets a significant un-balancing (or perhaps that should be re-balancing?) is coming.”

    That said, with both the ECB and BOJ injecting hundreds of billions each month – even as they are set to run ouf of “haven assets” in the coming year, there is still time before the global central bank balance sheet “tipping point” is reached and assets roll over…

    This post was published at Zero Hedge on Jun 17, 2017.


  • Matt King Is Back With A Dire Warning: “A Significant Un-balancing Is Coming”

    Earlier this week we discussed a chart from Citi’s Hanz Lorenzen, which we said may be the “scariest chart for central banks” and showed the projected collapse in central bank “impulse” in coming years as a result of balance sheet contraction, and which – if history is any indication – would drag down not only future inflation but also risk assets. As Citi put it “the principal transmission channel to the real economy has been… lifting asset prices” to which our response was that this has required continuous CB balance sheet growth, and with the Fed, ECB and BOJ all poised to “renormalize” over the next year, the global monetary impulse is set to turn negative in the coming year.

    This post was published at Zero Hedge on Jun 16, 2017.


  • Quiet Start To Quad Witching: Stocks Rebound Around The Globe, BOJ Hits Yen

    Today is quad-witching opex Friday, and according to JPM, some $1.3 trillion in S&P future will expire. Traditionally quad days are associated with a rise in volatility and a surge in volumes although in light of recent vol trends and overnight markets, today may be the most boring quad-witching in recent history: global stocks have again rebounded from yesterday’s tech-driven losses as European shares rose 0.6%, wiping out the week’s losses.
    USD/JPY climbed to two-week high, pushing the Nikkei higher as the BOJ maintained its stimulus and raised its assessment of private consumption without making a reference to tapering plans, all as expected. Asian stocks were mixed with the Shanghai Composite slightly softer despite the PBOC injecting a monster net 250 billion yuan with reverse repos to alleviate seasonal liquidity squeeze, and bringing the net weekly liquidity injection to CNY 410 billion, the highest in 5 months, while weakening the CNY fixing most since May. WTI crude is up fractionally near $44.66; Dalian iron ore rises one percent. Oil rose with metals. Treasuries held losses as traders focused on Yellen hawkish tone.
    The MSCI All Country World Index was up 0.2%, and after the latest global rebound, the value of global stocks is almost equal to that of the world’s GDP, the highest such ratio since th great financial crisis, BBG reported.

    This post was published at Zero Hedge on Jun 16, 2017.


  • Key Events In The Coming Busy Week: Fed, BOJ, BOE, SNB, US Inflation And Retail Sales

    After a tumultous week in the world of politics, with non-stop Trump drama in the US, a disastrous for Theresa May general election in the UK, and pro-establishment results in France and Italy, this is shaping up as another busy week ahead with multiple CB meetings, a full data calendar and even another important Eurogroup meeting for Greece. Wednesday’s FOMC will be the main event, with the Fed expected to hike 25bp (see full Goldman preview here), while the BOJ, BOE and SNB all remain on hold.
    Courtesy of BofA, here is the breakdown of key events:
    FOMC the star in a G10 Central Bank week After the eventful UK election, and less than eventful ECB meeting, the week ahead is a busy one, opening with the first round of the French parliamentary elections and with a plethora of data releases and central bank decisions to keep markets occupied. Another important Eurogroup meeting for Greece rounds out a full schedule.
    The FOMC meeting will be the main event of the week, where the Fed will deliver a 25 bps rate hike, in line with market expectations. While very weak retail sales or CPI could dissuade the Fed, this remains a very unlikely scenario absent a collapse in Wednesday’s CPI print. BofA expects lower inflation and growth forecasts, while the dots will show 3 hikes in 2018 and 3.25 hikes in 2019. The press conference will likely be focused on balance sheet normalization and implementation timing.
    No change from BoJ, BOE or SNB

    This post was published at Zero Hedge on Jun 12, 2017.


  • SocGen Angered By “Stupidly Strong” Correlation Between Yen And Treasury Yields

    In a world where stat arbs do most of the trading, and where central banks set the prices, everything is a correlation of a correlation of a correlation, and as we have not tired of pointing out since 2010, virtually every correlation starts with the USDJPY, the preferred funding vehicles for BOJ intervention in capital markets, as well as an indicator of Japanese pension fund, in most cases the GPIF, activity in the US risk assets.
    It is this USDJPY’s anchor that overnight angered SocGen FX strategist Kit Jucker who writes that “the correlation between USD/JPY and US Treasury yields remains stupidly strong.” As expected, the flow-thru starts with the BOJ:
    “The causation seems clear enough – the BOJ is anchoring Japanese yields and the relative appeal of the yen is a function of yields overseas, encapsulated by the global bellwether. The last year can be divided into two ranges. Pre-Trump, USD/JPY traded in a 98-108 range and 10s in a 1.3-1.8% range. Since mid-November, USD/JPY has traded in a 108-119 range, 10s in a 2.15-2.70 range. We are at the bottom of that range, in both FX and bond markets.”

    This post was published at Zero Hedge on Jun 6, 2017.


  • BoJ, ECB Balance Sheets Exceed The Fed’s For First Time Ever – What Happens Next?

    For the first time in history, both the ECB and BoJ balance sheets have grown larger than the Fed’s.
    The BoJ’s balance sheet topped the JPY500tn (USD4.48tn) mark at the end of May, central bank data showed today.
    Furthermore, the latest data also shows the pace of the increase in BoJ’s holdings has slowed considerably in recent months.
    At the end of May, the central bank’s holding was up JPY70.7tn from a year earlier, more than 10% below the BoJ’s official guideline of an annual increase of JPY80tn.

    This post was published at Zero Hedge on Jun 2, 2017.


  • “The Smoking Gun”: BofA Warns Fed Renormalization Could Send Equities 30% Lower

    With first the Fed, and then the ECB and BOJ, all expected to start reducing their balance sheets over the next two years, a bevy of central bankers has been busy on the jawboning circuit, explaining why this would not have a major impact on either bond yields or stocks. They may be quite wrong, however, according to the latest analysis released overnight by Bank of America’s rates strategist Shyam Rajan, who calls the upcoming “trillion dollar mismatch” between Treasury supply and demand over the next five years a “smoking gun” which will trigger an “equity-rate disconnect” due to the gradual phasing out of “price insensitive buyers” and calculates that “either rates need to be 120bp higher or stocks need to be 30% lower to trigger enough demand to match forward UST supply estimates.” Needless to say, both outcomes are negative for current record low volatility, and will have a substantial impact on risk-asset prices over the coming years, a vastly different forecast than the one the Fed has been scrambling to convey.
    Here is the gist of Rajan’s argument:
    The bond/equity disconnect vs. UST supply/demand
    The trillion dollar mismatch in Treasury supply/demand dynamics over the next five years will likely trigger an equity-rate disconnect correction, in our view. Our analysis suggests either rates need to be 120bp higher or stocks need to be 30% lower to trigger enough demand to match forward UST supply estimates. In this report, we quantify the projected increase in supply, the decline in price insensitive demand and the triggers required for the two main price sensitive sources – pensions (higher rates), mutual funds (lower equities) to step up, to clear the supply-demand mismatch in USTs.

    This post was published at Zero Hedge on May 30, 2017.


  • What Keeps Bank of America Up At Night

    It has been a painful, bruising intellectual exercise for BofA’s HY credit strategist Michael Contopoulos, who after starting off 2016 uber-bearish, was – together with every other money manager and advisor – taken to the woodshed, and forced to flip bullish, kicking and screaming, and advising BofA clients to buy the same junk bonds he told them to sell just a few months prior. Now, thanks to Trump, he may be finally seeing a glimmer of the bearish light returning, and in a note published this morning, Contopoulos asks whether the US is looking at a replay of 2014 and 2015, when as a reminder, a false dawn turned out to be an ugly dusk, and forced first the BOJ, then the ECB to intervene aggressively with even more QEasing.
    As BofA admits, “the last two weeks have further underpinned our belief that the market has had misplaced optimism in the new administration’s reform agenda, while we find more and more evidence that suggests the macro environment echoes that of 2014 and 2015. Meanwhile, the market environment has closely tracked that of late 2013 and early 2014, when expectations for higher rates, low defaults and strong fundamentals caused a bid for risk that sent yields to sub-5% until geopolitical risks shocked investors (a plane being shot down over Ukraine). Once cracks were exposed in 2014, and illiquidity concerns replaced a FOMO (fear of missing out) attitude, the ensuing collapse in crude left investors woefully unprepared for the troubles of the next year and a half.”

    This post was published at Zero Hedge on May 25, 2017.


  • Japan’s “Correction Protection Team” Rescue Stocks For Second Day

    A year ago, we noted that The Bank of Japan (BoJ) was a Top 10 holder in 90% of Japanese stocks. In December, we showed that BoJ was the biggest buyer of Japanese stocks in 2016. And now, as The FT reports, the real “whale” of the Japanese markets is stepping up its buying (up over 70% YoY) entering the market on down days more than half the time in the last four years.
    Since the end of 2010, The FT notes that the BoJ has been buying exchange traded funds (ETFs) as part of its quantitative and qualitative easing programme. The biggest action began last July, when its annual acquisition target was doubled to 6tn. Since then, the whale designation has seemed pretty obvious: the central bank swallows a minimum of 1.2bn of ETFs every single trading day (tailored to support stocks that further ‘Abenomics’ policies), and lumbers in with buying bursts of 72bn roughly once every three sessions.

    This post was published at Zero Hedge on May 19, 2017.


  • A Problem Emerges: Central Banks Injected A Record $1 Trillion In 2017… It’s Not Enough

    Two weeks ago Bank of America caused a stir when it calculated that central banks (mostly the ECB & BoJ) have bought $1 trillion of financial assets just in the first four months of 2017, which amounts to $3.6 trillion annualized, “the largest CB buying on record.”
    BofA’s Michael Hartnett noted that supersized central bank intervention which he dubbed a “liquidity supernova” is “the best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro…”
    To be sure, Hartnett’s “discovery” did not come as a surprise to regular readers: back in October 2014, Citi’s Matt King calculated that it costs central banks $200 billion per quarter to avoid a market crash, or as he put it:
    For over a year now, central banks have quietly being reducing their support. As Figure 7 shows, much of this is down to the Fed, but the contraction in the ECB’s balance sheet has also been significant. Seen from this perspective, a negative reaction in markets was long overdue: very roughly, the charts suggest that zero stimulus would be consistent with 50bp widening in investment grade, or a little over a ten percent quarterly drop in equities. Put differently, it takes around $200bn per quarter just to keep markets from selling off.

    This post was published at Zero Hedge on May 6, 2017.


  • “Mystery” Central Bank Buyer Revealed, Goes On Q1 Buying Spree

    In the first few months of the year, a trading desk rumor emerged that even as institutional traders dumped stocks and retail investors piled into ETFs, a “mystery” central bank was quietly bidding up risk assets by aggressively buying stocks. And no, it was not the BOJ: while the Japanese Central Bank’s interventions in the stock market are familiar to all by now, and as we reported last night on sessions when the “the BoJ comes in big, the average return on the [Nikkei] is about 14 basis points higher” with Nomura calculating that “the BoJ has provided a cumulative boost to the Nikkei of about 1,400 points”…

    This post was published at Zero Hedge on May 6, 2017.


  • Bank Of Japan “Bought The Dip” Over Half The Time In The Last 4 Years

    A year ago, we noted that The Bank of Japan (BoJ) was a Top 10 holder in 90% of Japanese stocks. In December, we showed that BoJ was the biggest buyer of Japanese stocks in 2016. And now, as The FT reports, the real “whale” of the Japanese markets is stepping up its buying (up over 70% YoY) entering the market on down days more than half the time in the last four years.
    Since the end of 2010, The FT notes that the BoJ has been buying exchange traded funds (ETFs) as part of its quantitative and qualitative easing programme. The biggest action began last July, when its annual acquisition target was doubled to 6tn. Since then, the whale designation has seemed pretty obvious: the central bank swallows a minimum of 1.2bn of ETFs every single trading day (tailored to support stocks that further ‘Abenomics’ policies), and lumbers in with buying bursts of 72bn roughly once every three sessions.

    This post was published at Zero Hedge on May 5, 2017.


  • Why “Nothing Matters”: Central Banks Have Bought A Record $1 Trillion In Assets In 2017

    A quick, if familiar, observation to start the day courtesy of Bank of America which in the latest overnight note from Michael Hartnett notes that central banks (ECB & BoJ) have bought $1 trillion of financial assets just in the first four months of 2017, which amounts to $3.6 trillion annualized, “the largest CB buying on record.”
    As Hartnett notes, the “Liquidity Supernova is the best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro…”

    This post was published at Zero Hedge on Apr 21, 2017.


  • The End of Quantitative Easing – Perhaps Now It Will Be Inflationary?

    One of the greatest monetary experiments in financial history has been the global central bank buying of government debt. This has been touted as a form of ‘money printing’ that was supposed to produce hyperinflation. That never materialized as predicted by the perpetual pessimists. Nevertheless, the total amount of Quantitative Easing (QE) adding up the balance sheets of the Federal Reserve (Fed), the European Central Bank (ECB) and Bank of Japan (BOJ) is now around $13.5 trillion dollars, which by itself is a sum greater than that of China’s economy or the entire Eurozone for that matter.
    ***
    If QE failed to produce inflation, then ending QE may actually produce the inflation people previously expected. Where’s the strange logic in that one? Well you see, it really does not matter how much money you print, if it never makes it into the economy, it will not be inflationary. Additionally, even if it makes it into the economy and the people hoard for a rainy day, it still will not be inflationary.

    This post was published at Armstrong Economics on Apr 20, 2017.


  • Japan’s 10Y Yield Drops Below Zero Again: All Eyes On The BOJ

    With every other asset class roundtripping the November election outcome, it was only a matter of time before Japan’s 10Y JGB – which on February 2 briefly peaked above the BOJ’s “yield curve controlling” 0.10% yield ceiling, rising as high as 0.15% to the shock of a market ready to declare that Japan had finally lost control of its bond market – retraced the entire “reflationary” move from 0.0% to 0.1%. And, sure enough, following today’s violent deflationary capitulation moments ago Japan’s JGB 0.1% of 2027 once again dipped back under 0%, sliding as low as -0.003% on Wednesday morning in Japan.
    What happens next?
    According to traders, focus will turn to whether the BOJ, in pursuing “yield curve control”, will reduce the amount of JGBs it monetizes. “Amid favorable environment for bonds, focus is on BOJ as whether there will be a reduction in purchase amounts will test the bank’s tolerance for 10-year yield falling into negative,” Katsutoshi Inadome, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, wrote in note according to Bloomberg.

    This post was published at Zero Hedge on Apr 18, 2017.


  • Overseas Stimulus Train Keeps Hurtling Forward

    As we focus on the most recent moves of the Federal Reserve, it’s easy to miss the bigger picture. The Fed has been trying to move toward an interest rate ‘normalization’ program for more than a year, since nudging rates up .25 points in Dec. 2015.
    Although it remains to be seen whether the two interest rate hikes last December and March signal a rocket launch or a sputtering firecracker, the central bank at least wants to give the appearance of tightening. The Fed has also launched some trial balloons with talk of shrinking its bloated balance sheet.

    But some other central banks around the world aren’t even making a pretense of ‘normalization.’ For instance, Bank of Japan Governor Haruhiko Kuroda said Monday the central bank remains committed to maintaining its massive monetary stimulus program.
    Last fall, the BOJ launched a program to hold short-term interest rates in negative territory at minus 0.1%. The bank also seeks to keep the Japanese 10-year bond yield at about 0% through aggressive asset purchases.
    Kuroda’s comments echoed statements he made in March. Japanese central planners remain obsessed with hitting the 2% target inflation rate, as Kuroda stated at a Reuters Newsmaker event last month:

    This post was published at Schiffgold on APRIL 10, 2017.


  • Abe Advisor Says It’s Time To Pull The Plug On QE

    In what may be one of the few sane policy recommendations to emerge out of Japan in years, Nobuyuki Nakahara, an adviser to Prime Minister Shinzo Abe and an influential former Bank of Japan board member said the BOJ should make a “clean break” from its current policy
    approach when Kuroda’s term ends next spring, roughly at the same time as Yellen’s term is ending (at which point a Trumpian Fed is said to arrive). According to Nakahara, Kuroda’s successor should announce a “second phase” of the BOJ’s quantitative-easing program that end the BOJ’s attempts at “yield control” and slashes purchases of JGBs by at least half, Dow Jones reported.
    He described the central bank’s efforts to control the yield curve as an attempt to make up for the “mistake” of introducing negative interest rates in early 2016.
    In a radical – and accurate – departure from the status quo which will inevitably result in currency collapse and hyperinflation, controlled Inflation in Japan would return thanks to the correction in the yen’s strength, the tightening of the labor market to full employment and a tick-up in wages, the former central banker said, so the bank should scale back its efforts to fuel it. If the bank is reluctant to act so boldly, it should commit to buying only as many JGBs as needed to reach 2% inflation by 2023 at the latest, he added.

    This post was published at Zero Hedge on Apr 3, 2017.