Japan’s Bond Market is One Gigantic Joke – “No One Judges Corporate Credit Risks Seriously Anymore”

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While anyone paying attention is well aware how much of a farce central bank driven financial markets have become, the following paragraphs are still downright terrifying.

From a just published article at the Nikkei Asian Review:

TOKYO — Fixed-income investors in Japan are increasingly assessing bonds based on their likelihood of being bought by the central bank, rather than the creditworthiness of the issuers.

“I would have bought it at all costs had I known that it was on sale,” a fund manager at a domestic asset management institution said with frustration Friday. The fund manager learned too late from Japan Securities Dealers Association data that a Mitsui & Co. bond had been traded the previous day. The bond, with about three years to maturity, was traded with a yield of around negative 0.008% — meaning that a buyer paid a high price and would incur a loss if the instrument was held until maturity.

Still, the fund manager desperately wanted to get hold of the bond because he bets that debt issued by Mitsui and other trading houses will be picked up by the Bank of Japan in its bond purchase program. Even if an investor buys a bond with a subzero yield, the investor could sell it to the central bank for a higher price, the thinking goes.

Brother Industries bond was a recent victim, according to one investor. The yield on an order for the three-year Brother bond issued in November dipped to negative 0.01% in the secondary market last month amid speculation that it may be bought by the BOJ. But the BOJ apparently left it off the list, and the yield rose subsequently. The fluctuation may be attributed in part to changes in government bond yields, but the swings were still remarkable given that the company’s creditworthiness remained unchanged.

“It goes to show that no one judges corporate credit risks seriously anymore,” said Katsuyuki Tokushima at the NLI Research Institute.

Take that peasants.

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For more on the disaster that is Japan, see:

Abenomics Fail – Safe Sales Soar in Japan as People Move to Store Cash Amid Negative Interest Rate Turmoil

Japanese Government Cracks Down Hard on the Media Amid Pitiful Economic Performance

Video of the Day – Brawl Breaks Out in Japanese Parliament Over “War Bill”

Unusually Massive Protests Erupt in Japan Against Forthcoming “War Legislation”

Japan’s Economic Disaster – Real Wages Lowest Since 1990, Record Numbers Describe “Hard” Living Conditions

The Stock Market Myth and How the Japanese Middle Class is on the Precipice Thanks to Abenomics

War on Democracy: Spain and Japan Move to Criminalize Protests

In Liberty,
Michael Krieger

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