Two days ago, when QE ended and knowing that the market is vastly over estimating the likelihood of a full-blown ECB public debt QE, we tweeted the following:
It’s all up to the BOJ now
— zerohedge (@zerohedge) October 29, 2014
Little did we know how right we would be just 48 hours later.
Because as previously reported, the reason why this morning futures are about to surpass record highs is because while the rest of the world was sleeping, the BOJ stunned those few who were looking at Bloomberg screens with a decision to boost QE, announcing it would monetize JPY80 trillion in JGBs, up from the JPY60-70 trillion currently and expand the universe of eligible for monetization securities. A decision which will forever be known in FX folklore as the great Halloween Yen massacre.
In retrospect, the BOJ’s announcement should have been anticipated. Recall that yesterday, the biggest non-story was the regurgitated headline that the Japanese Pension fund would boost its holdings of domestic and foreign stock from 12% to 25%, while slashing its Japan bond holdings from 60% to 35%, something that had been leaked previously. The full changes:
- Domestic stocks raised to 25% from 12%
- Japan bonds cut to 35% from 60%
- Overseas shares 25% from 12%
- Foreign debt 15% from 11%
But while Japan’s eagerness to bet its retirees lifetime savings on GoPro had been well-known previously, it also meant that someone would have to step in and buy the hundreds of billions of JGBs the GPIF had to sell in what over the past year became the world’s most illiquid bond market, often going for days without a single transaction.
That someone, a few hours ago, was revealed to be the Bank of Japan, which in addition to now clearly becoming the only buyer of only resort for Japanese bonds, has tipped its hands that it is going all in on pushing the Nikkei higher at all costs, even if it means crushing the domestic economy, something whicheven Keynesian “experts” say will be the outcome if the Yen continues to slide below 110 for the dollar.
So for all those wondering why futures are back to all time highs, here is the reason:
- ITALIAN SEPT. UNEMPLOYMENT RATE RISES TO 12.6%, MATCHING RECORD
No wait, sorry, that’s reality – something that hasn’t mattered to markets since 2008. Here is the reason, all thanks to CTRL-P:
- KURODA SAYS EASED TO MAINTAIN POSITIVE CHANGES IN EXPECTATIONS
- KURODA: TODAY’S DECISION SHOWS BOJ’S UNWAVERING DETERMINATION
In other words, several days after Larry Fink mysteriously visited Abe, the BOJ announced it would do everything in its power push the Nikkei into green for the year, which it did with its announcement overnight, and to truly crush the local population’s buying power.
