Doorways and Liquidity?

by Bill Holter

Dear CIGAs,

A very curious thing happened overnight in Japan, trading in their 10 year bonds was briefly halted. This was the result of a selloff that pushed yields from minus .10% up to minus .015%. The price move in the bonds was only .6%, so not a huge move but the circuit breakers were hit and trading stopped.

So why is this a big deal, or is it? First, the JGB market is second or third largest and most liquid in the world behind U.S. Treasuries and maybe Eurobonds. This sort of chaotic movement should not happen. More importantly, I believe the circuit breakers are so “tight” because a panic event cannot be allowed to gain ANY momentum.

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