All Japanese bonds have a yield under 0.3% as of April 19.
- Yield on the 40-year bond fell to a record low 0.29%.
- Yield on the 30-year bond hit a record low 0.285%
- Japan’s two-year bond yield hit a record low minus 0.265 percent.
Please consider All Japan Sovereigns Yield Below 0.3% as 40-Year Hits Record Low.
Japan’s 40-year bond yield fell to a record low, meaning all the nation’s sovereign bonds yield less than 0.3 percent as investors rush for securities with positive income.
The yield on the 1.4 percent government note maturing in March 2055 fell to 0.29 percent in Tokyo Wednesday from 0.415 percent on Friday when the bond had last traded, according to Japan Bond Trading Co. The decline spread to other longer-dated maturities, pushing 30- and 20-year yields to record lows of 0.285 percent and 0.245 percent respectively. Japan’s two-year yield also reached a record minus 0.265 percent.
Bond-buying operations for these zones by the Bank of Japan are also tightening market conditions as negative rates have pushed investors seeking positive yields into longer-dated debt. Yields on bonds with maturities as long as 10 years have gone negative since the BOJ announced in January that it would start charging lenders on some of their excess reserves held with the central bank.
‘No Choice’
“With yields up to 10 years sinking below zero, investors will look at zones on the curve with plus yields,” said Makoto Yamashita, a strategist for Japanese interest rates at Deutsche Bank AG’s securities unit in Tokyo. The 20-year auction scheduled for Thursday is expected to meet healthy demand, he said. “There are investors who have no choice but to buy.”
“Strong demand for these bonds is strengthening downward pressure on their yields,” said Takafumi Yamawaki, the chief rates strategist in Tokyo at JPMorgan Chase & Co. There is also “speculation among some overseas investors of additional easing by the BOJ,” he said.
Bank of Japan Corners 33% of Bond Market
Bloomberg reports Japan Keeps Borrowing as Yields Hit Record Low.
For Japan’s bond investors, it seems the bigger the debt burden, the better.
Yields on some of Japan’s longest sovereign notes dropped to records as ruling party lawmaker Kozo Yamamoto floated on Thursday the idea of borrowing an extra 20 trillion yen ($182 billion) to fund earthquake relief and bolster a struggling economy. With most of the nation’s bonds offering negative yields and the Bank of Japan cornering a third of the market as part of its unprecedented stimulus, strategists say the government with the world’s biggest debt pile will have no trouble selling more as investors hunt any notes that can be traded and offer a return.
Japanese debt yields have slid to record lows as the BOJ buys nearly all the government notes newly issued to the market. All benchmark yields up to 10-years are below zero, and the 30-year yield dropped to an all-time-low of 0.265 percent on Thursday while the 40-year rate fell to a record 0.29 percent a day earlier.
An auction of 1.1 trillion yen of 20-year JGBs on Thursday drew the strongest demand since November, in a sign that investors are still keen to acquire Japanese notes with positive yields.
Yamamoto of the Liberal Democratic Party, who had been calling for a 10 trillion yen fiscal package before temblors struck Japan’s southwest, also said Thursday that he personally thinks the BOJ should boost monetary stimulus. The central bank’s policy board next meets for two days through April 28.
Desperate Measures Needed
Try as it might, Japan has failed to trash its currency.
Proof is obvious: negative rates on 10-year bonds and 40-year bonds yielding a mere 0.29 percent.
Abenomics has failed.
Mike “Mish” Shedlock
Isn’t this a good thing. I mean if they had to pay back rates of over 1% on their bonds, wouldn’t they go bankrupt in short order. And why aren’t investors jumping ship, do they think they can time the market?
Japanese bankers are mercilessly oppressing their elders. The shame.
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“investors” LOL — read “algobots”, or , “hedgies, pension funds, mutual funds using OPM(other people’s money)” to front run the BOJ in the hope of offloading the bonds at a profit to a greater fool. I can’t believe anyone would hold these to maturity.
Negative interest rates are terrible for all of us, but not leaders. Interest rates come with accountability as the borrower must pay back the principal and the interest owned and this enforces validation, as an institution that can borrow money and pay back less money doesn’t need a good idea – they’re getting free money. It’s a form of theft, even if initially it’s allowed (just wait until no one buys negative interest rate bonds – then it will be forced). However, we can see why governments like negative interest rates, which is why we’ll see more of them everywhere.
Negative interest rates won’t devalue currencies if the G20 nations can coordinate simultaneous equivalent devaluations. Negative interest rates do make government debt unpalatable and the central banks can buy it all. After the central banks own all government debt it is effectively cancelled.
That is if you don’t think open government borrowing and spending of newly invented money isn’t devaluative in competition with existing money holders or potential borrowers.
Is it a case of ‘ you take out private debt, we will finance it by increasing money supply ‘, or ‘ otherwise your savings or jobs will be lost’ ?
It is always for ‘you, the people’.
However if a society accepts this form of social enterprise who, or how, are we to judge ?
Historically when a country has a huge debt in their own currency, a large deficit, and the central bank becomes the only buyer of government bonds, they are headed for hyperinflation.
Except it doesn’t. Hyperinflation happens when a country tries to consume resources far beyond their ability to produce. The central bank buying debt in those cases is just the mechanics of how hyperinflation gets implemented. It could just as easily be a treasury dept running printing presses to pay the bills (see, for example, the Confederate States at the end of the US Civil War).
I did not say this was the only way to get hyperinflation; however, I do believe that central bank buying government debt is the most common route to hyperinflation. For example, Germany, Zimbabwe, etc.
I believe we are in uncharted territory because the entire world is swimming in debt. There is no one with a balanced budget. Instead faith comes from the strength of your economy. Thus banks give more to those who have and ignore those who have not.
I believe the P&E’s on markets tell the same story.
Total world wide collapse, when the central bankers have confiscated all of the world assets into debt.
What assets have been confiscated? Think about it. Gov’t borrows and the central bank lends to them by buying the debt. What has been confiscated from you? You don’t own any of that debt. If you did the central bank didn’t just take it from you, they purchased it from you in the open market which means you sold it for cash, willingly. If you want use that cash to buy some other asset.
Japanese Government Bonds = “Trading Sardines”, as in the old Wall St. joke.
A global pick pocket economy based on front running central banks needs ever falling interest rates.
You gotta do what you gotta do.
Follow the math
Meanwhile, in the economy….
http://9to5mac.com/2016/04/22/apple-drops-price-of-iphone-se-iphone-6s-and-iphone-6-in-japan-by-10/
10% drop across the board? More deflation!
Just imagine you invested $1,000 for 40 years at 0.29% compounded annually. $1,000 * 1.0029^40 = $1,122,81. $122 of growth after 2 freakin’ generations!! Why even bother?
Errr yes why bother? Why do you think saving should be rewarded? Because it is morally good? that’s not how markets work, markets reward what is needed and not what isn’t. If less savings is needed then the rewards for savings are going to be low or even negative.
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