Its a sad state of the world where investors get “excited” about a zero percent bond.
(Bloomberg) — A 0.0000148% yield drew strong demand for a bond offering in Japan, as investors clamor for safe debt amid the pandemic even if it pays them next to nothing.
Japan Student Services Organization priced 30 billion yen ($278 million)of two-year social bonds on Friday with a coupon of 0.001% and a price of 100.002 yen, which equates to the near-zero yield. Orders totaled about 2.5 times the amount sold, according to people familiar with the matter.
Japan has long been home to striking examples of how investors will grab at whatever yield they can find on safer securities, a trend that has gone global and been intensified by monetary easing to cushion economies from the economic damage caused by the Covid-19 pandemic. The securities from Jasso, an independent administrative agency that offers student loans, are rated AA+ by Rating & Investment Information.
Jasso’s bonds drew strong demand from investors who are raising their holdings of environmental, social and governance assets. Buyers ranged from pension funds, banks, shinkin banks and foreign investors, according to the people familiar, who asked not to be identified as the details are private.
The organization has a history of notable debt deals. It priced Japan’s first minus-yield agency bond last year, when it sold a note with a coupon of 0.001% and a price of 100.003 yen, working out to a yield of around minus 0.0005%.
It is not that surprising since 2-year Japanese Government Bond yields remain in negative territory, as do JGB of maturities of 10-years or less.
No, the Coronavirus is not the same as the film “28 Days Later” where a virus turns people into flesh-munching zombies.
True, the one-day drop on February 27th was -11.7%. But we don’t know yet what the return will be after 10 days. But if history is a guide, only the correction of 10/10/08 was followed with continued declines out to 90 days.
So, while Coronavirus cases increasing, the morality rate is low. So far.
There is not even a red-flashing warning from the Hindenburg Omen that “predicted” the 2008 stock market crash.
The NYA is below its lower Bollinger Band indicating that a rally is forthcoming.
Japan’s economy took another battering from a sales tax in the last quarter, contracting by the most in more than five years and fueling recession concernsas the widening coronavirus outbreak hits activity at the start of 2020.
The nation’s gross domestic product shrank at an annualized pace of 6.3% from the previous quarter in the three months through December, according to a preliminary estimate by the Cabinet Office Monday. October’s sales tax increase and super typhoon heavily weighed on economic activity, cooling consumer spending, business investment and production supply chains.
-6.3% QoQ (Annualized) growth?
Apparently, the Bank of Japan’s pushing their sovereign yield curve into negative territory for maturities of less than 15 years has not done the trick.
(Bloomberg) — Bank of Japan Governor Haruhiko Kuroda says the novel coronavirus is the biggest uncertainty facing the Japanese economy right now and the central bank won’t hesitate to take additional monetary policy action if needed.