Japan’s 10 Year Bond Yield Falls Below Zero

Posted on Feb 9 2016 - 11:32am by Dan

From Bloomberg

The yield on Japan’s benchmark 10-year government bonds fell below zero for the first time, an unprecedented level for a Group-of-Seven economy, as global financial turmoil and the Bank of Japan’s adoption of negative interest rates drive demand for the notes.

The 10-year yield has tumbled from 0.22 percent before the BOJ surprised markets with the decision on Jan. 29 to introduce a minus 0.1 percent rate on some of the reserves financial institutions park at the central bank. It fell 7 1/2 basis points to a record minus 0.035 percent as of 3:05 p.m. in Tokyo. – Bloomberg, February 8, 2016

By way of disclosure, at the time of this writing, I still have that GBP/JPY short and the AUD/CAD short trades on, that I mentioned last week.  I may exit the AUD/CAD trade soon.

For those of you who are new to the markets, you may have heard us talk of negative interest rates.  We stated at that time, that we do not believe Negative Interest rates will work, because what is occuring  is no longer about ‘interest rates’.  We believe you are beginning (and we do stress, beginning) to see the truth of our belief.

The Nikkei 225 has slipped about 5.5% from the time that Japan announced that it was persuing a Negative Interest Rate policy.  The entire front end of the Japanese Bond curve is below zero.  We are not talking about the yield on immediate cash, parked with the Central Bank of Japan.

The Japanese 10 year bond yield is below zero.

Think about that for a moment.

1 Comment so far. Feel free to join this conversation.

  1. Mappy February 9, 2016 at 8:37 pm - Reply

    Never thought I’d ever see the day. I guess it’s a first for everything. This market is a bit too choppy for my taste.

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