by Bill Holter, Miles Franklin:
Japan actually had a 36 hour period of time this past week where no long term treasury securities traded privately. I have a couple of questions about this. 1. Could this really happen? 2. What does this mean? Of course there are other questions like why did this happen?
Think about this, Japan is the 3rd largest economy in the world and their bond market is the 2nd largest only behind the U.S. How could there be no trades, none, zero, and nada?! But this did apparently happen. It happened because there were no bids, none. It happened because their “QE” has driven interest rates too low, so low that no one (except of course the Bank of Japan) wants to purchase these bonds. Please understand that “liquidity” is the name of the game when it comes to bond markets. If there is no liquidity it usually means that there is no “exit door,” in this case the Bank of Japan apparently is the ONLY exit door as they are pretty much buyers of any and all securities that are offered for sale.
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