Japan Bond Market Dies; Nobody Comes to the Funeral
You would think it worthy of coverage in the mass media… one of the largest bond markets in the world has effectively died;
Of course this should come as no surprise given the BoJ's dominance and our recent discussions of the JGB market being – for all intents and purpose – "dead"…
A decade ago this would have been unthinkable. Today, it goes unreported. This of course is the fate of all bond markets… where the debt of nations will be frozen, on central bank balance sheets, like the bodies of wealthy futurists, waiting for posterity to come to the rescue.
The death of bond markets is a creeping thing… but it will eventually envelop all as the self-imposed walls of the money printing box tighten on various markets;
ECB president Mario Draghi set out to stimulate bank lending by purchasing covered bonds. Yields plunged, which is precisely what Draghi wanted.
Now, the average covered bond yield of 0.53% is so low that investors won't touch them. Numerous bond deals have been cancelled due to lack of demand. The buyer of only resort is the ECB.
Unlike central bank of a single nation, EU treaty bans ECB to bail out a nation. To circumvent the rule, or explain away, ECB needs agreement from member nations, not majority, theoretically ALL, in reality, powerful ones. German Constitution Court ruled against QE – you know the problem. Unless German crash and burn, it stops ECB conducts QE to bail out democratic nations at its expense, says no way German.
ECB is eager to do QE. They dream that they will get what happened to USA. They will be wrong. EURO is NOT a reserve currency, thanks to EU nations together with ECB destroyed its credibility. Why do you want to hold a currency with negative interest rate and guaranteed devaluation so a group of voter can vote themselves $#@%%! democractically.
According to SWIFT, in international commerce trade, since last year 2013, RMB surpassed EURO became the second most used currency in international trade. Still, US$ is no. 1.
Europe needs real reform which is poetical suicide to politicians there. Therefore, it is catch 22.