Forget The Fed, Should We Be Worrying About Japan by Attain Capital.

If the Federal Reserve isn’t going to be the catalyst for interest rates finally moving higher, maybe it will be another player??  That’s the question floating around today after the Bank of Japan made an inconsistent choice (via Reuters).

“This morning, the Bank of Japan did not offer to buy JGBs under its massive asset purchase programme, as the Ministry of Finance conducted its monthly 2.4 trillion yen ($22.91 billion US dollar) 10-year JGB auction…”

The removal of the artificial demand sent Yen futures falling, and the Yen based Nikkei 225 up over 2% on the day.

Japan

(Disclaimer: Past performance is not necessarily indicative of future results)

But the more interesting action was in Japanese Bonds, which fell (rates higher), and in other world bond prices such as the US 30 yr and 10 yr. US 30yr Bond were down about -2.00% today (interest rates higher), and in a year where bond prices have done nothing but go up, that’s something.  The question, of course, is whether this is a preview of what will happen when the Fed stops bidding on US bonds.

This is only one day in the market, but the timing of the BOJ along with the return of US traders from the long holiday weekend has certainly caused an uptick in market volatility across the board. Taking a glance at the rest of the futures board today, you see that there are some other big moves today outside of bonds. Coffee up 3.4%, Lean Hogs up 1.83%, Crude down 3.12%, Wheat down 1.56%, Gold down 1.56%, and Soybeans up 0.78%.

Japan

(Disclaimer: Past performance is not necessarily indicative of future results)
Table Courtesy: Finviz

While the bond move no doubt caught many on the wrong foot (it had been trending nicely upwards, after all), this type of volatility should be a good thing if it continues into the fall. Here’s hoping.

“The Managed Futures Blog is a compilation of thoughts, research, attempts at humor, and more from the team at Attain Capital Management (“Attain”). Attain pairs high net worth individuals, RIA’s, and institutional investors with alternative investments in commodities, managed futures, and global macro strategies through privately offered funds and managed accounts. Click here to sign up for their insight and analysis.”