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Japan: How The Government Pension Fund Plans A Masssive Bond Dump Into A Dead JGB Market
Conta Corner ^ | 11 June 2014 | David Stockman

Posted on 06/18/2014 1:55:15 PM PDT by Lorianne

So this is how it works. Japan has the most massive public debt in the world relative to national income, but the implicit aim of Abenomics is to destroy the government bond market. After all, if inflation goes to 2% or higher, government bonds yielding 0.6% will experience thumbing losses. Even the robotic Japanese fund managers no longer want to hold the JGB—- as evidenced by another session when no future contracts on either the 10-year or 20-year bond changed hands. As Zero Hedge noted,

You know things have got a little too strange when the largest government bond market in the world saw no futures trades in the morning session last night. We may complain in the US of falling volumes but none, zero, zip, nada is about as low as it gets; and that is how many trades occurred in the 20Y futures contract in Japan (and 10Y cash bond market). This is not the first time as Mizuho warned in Nov 2013 that “to all intents and purposes, there is no JGB market.” And this lack of trading on a day when major macro data printed far worse than expected… well played Abe… you entirely broke your bond market.

In effect, the BOJ is the bond market—that is, the buyer of first, last and only resort. Yes, there are upwards of $12 trillion of Japanese government debt and other obligations outstanding. In normal times, a bond market that didn’t trade in the context of such a massive overhang would have produced sheer panic and bedlam among officialdom.

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1 posted on 06/18/2014 1:55:15 PM PDT by Lorianne
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To: Lorianne
Sadly, the same brand of lunacy rules the Federal Reserve Banking system in the USA...

The Ponzi in Japan - just as the Ponzi in the USA - will continue to "work" in appearance until, well, it fails to work and collapses. It is only a matter of time.

Countries having economies in fail mode because of their extremely high and growing levels of debt cannot improve their economies in real and lasting ways by finding innovate new ways to pile more and more debt on top of the already stinking and ready to collapse heap of existing debt.

2 posted on 06/18/2014 9:06:32 PM PDT by JustTheTruth
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