Off The Rails: No Trades in Japan 10-Year Bonds Shows Limits of BOJ Tweaks (Godzilla Strikes Again?)

Instead of “Off the Run Treasuries,” Japan has “Off the Rails sovereign debt.” As if Godzilla has once more attacked Tokyo.

(Bloomberg) — Japan’s benchmark bonds recorded no trades on Wednesday, less than a month after the central bank sought to enliven the world’s second-biggest debt market by relaxing yield control.

That’s the seventh instance this year when the debt didn’t change hands, though the first since July 31 when the Bank of Japan said it will allow the 10-year yield to deviate by as much as 0.2 percentage points around zero percent. The yield ended at 0.095 percent on Tuesday, a fifth straight day of close at that level.

While Bank of Japan board member Hitoshi Suzuki said the central bank still needs more time to decide if the policy tweak, the first since yield-curve control was introduced almost two years ago, is sufficient, consensus has emerged among regional banks and insurance companies that more needs to be done as trading returns to abysmal levels.

“There are few trading incentives,” said Eiichiro Miura, general manager of the fixed-income investment department at Nissay Asset Management Corp. in Tokyo. “The market is still trying to figure out the real intention of the BOJ’s policy tweaks as the central bank hasn’t taken any action since it changed its policy.”

Forty-year JGBs haven’t recorded any trades since last Thursday, while two-year debt hasn’t changed hands since Friday, according to Japan Bond Trading Co. Five-year bonds were last traded on Monday.

No trading of Japan’s sovereign debt?

Here is a comparison of the US On/Off the run curve and Japan’s Off the rails sovereign curve.


And here is a chart of Japan’s population, denoting the repeated attacked by Godzilla.


Yes, Godzilla has led to Japan’s sovereign debt going “off the rails.”




One thought on “Off The Rails: No Trades in Japan 10-Year Bonds Shows Limits of BOJ Tweaks (Godzilla Strikes Again?)

  1. How is a $100 face value bond with essentially a zero percent coupon any different from a $100 bill?
    IMHO, it isn’t.
    So why would I trade you my $100 bill for your $100 bill? What’s the point?
    There is none, and that’s why there is no trading going on.


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