Nikkei falls 3 per cent and Kospi 3.6 per cent as Japan's 10-year yield reaches 3.02 per cent

A 3.02 per cent coupon, the first since 1996

Tokyo's Nikkei 225 fell 3 per cent to 64,278.95 and the Kospi fell 3.6 per cent to 6,588.95 on Wednesday after Wall Street slipped and the bond selloff spread across markets. The 10-year US Treasury yield rose to about 4.80 per cent from 4.75 per cent on Monday, and Japan's 10-year yield stood near 3.02 per cent, its highest since 1996. Hong Kong's Hang Seng fell 0.8 per cent, Shanghai 0.9 per cent and Australia's S&P/ASX 200 1.1 per cent, while the dollar rose to 160.27 yen. Brent crude traded at 95.56 dollars a barrel after the United States launched another round of strikes on Iran. On Tuesday the S&P 500 slipped 0.7 per cent, the Dow 0.8 per cent and the Nasdaq 1 per cent. The new coupon is written into this session; which name still has a bid sits on a separate line of the same tape.^[1]

The 10-year Japanese government bond yield reached 3 per cent on Tuesday for the first time since September 1996, with the five-year at a record high and the two-year at a level unseen in more than three decades. The Bank of Japan policy rate stands at 1 per cent, reached through a sequence from 0.5 per cent to 0.75 per cent last December and then to 1 per cent in June. Markets price an 80–90 per cent chance of a move to 1.25 per cent at the 17 and 18 September meeting, which would be a 0.75 per cent increase in nine months. A Bloomberg gauge of global bond yields reached 3.72 per cent, its highest since 2008. The yen traded around 160 per dollar, the level markets watch for intervention. The Bank of Japan has not yet changed the policy rate; what is already priced is how the maturity calendar is cutting the coupon.^[2]

SoftBank Group down 6.3 per cent: the first liquid door

In that same Wednesday session SoftBank Group fell 6.3 per cent, Samsung Electronics 3.3 per cent and SK Hynix 3.5 per cent. The Nikkei 225 drop of 3 per cent and the Kospi drop of 3.6 per cent are index averages; the one-person door sits in the name that still has a buyer. SoftBank Group carried one of the session's wider losses. Hang Seng at 0.8 per cent, Shanghai at 0.9 per cent and the S&P/ASX 200 at 1.1 per cent left a narrower print. Tuesday's S&P 500 loss of 0.7 per cent, the Dow 0.8 per cent and the Nasdaq 1 per cent had already closed before Wednesday's Asia session. Liquidity steps aside here: when the coupon is rewritten, the first sale is a list of whose paper still has a bid.^[1]

The 3.02 per cent 10-year Japanese coupon and the selling in the Nikkei 225 and the Kospi land in the same window; the Bank of Japan rate is still 1 per cent while markets price an 80–90 per cent chance of 1.25 per cent on 17 and 18 September. The forced-sale channel sits here: when the long coupon is rewritten, the mark-to-market loss moves into the equity that still has a bid — SoftBank Group, Samsung Electronics, SK Hynix — while the bond book itself does not turn into cash at the same speed. Another reading is open: the United States round of strikes on Iran and Brent at 95.56 dollars a barrel can drop the same names in the same session as a separate risk-appetite shock, in which the coupon and the share merely sit side by side. Which channel is running, and who had to sell, is not yet on these pages.^{[1], [2]}

6 billion pounds of Healey's 22.7 billion pounds of room

10-year gilt yields hit 5.2 per cent on Tuesday, an 18-year high, and the 30-year reached 5.9 per cent as a global bond sell-off met Middle East supply fears. Simon French of Panmure Liberum estimates the move takes about 6 billion pounds out of the 22.7 billion pounds of headroom the government held against its fiscal rules, a room drawn from forecasts set before the Iran war. Kathleen Brooks, research director at XTB, said elevated oil prices could persist and could add to volatility; Brent crude was near 91 dollars a barrel in that report. Oxford Economics adviser Michael Saunders said the Bank of England could ease the pace of bond sales from 70 billion pounds this year to 50 billion pounds to limit upward pressure on gilt yields. The buffer here stands as a suggestion: if the pace slows, the buyer of the long coupon stays on the official side.^[3]

Three curves sit under the same maturity constraint: Japan's 10-year at 3 per cent and 3.02 per cent, the United States at 4.80 per cent, the United Kingdom at 5.2 per cent and 5.9 per cent on the 30-year. The first wide sale printed in equities, with the Nikkei 225 down 3 per cent, the Kospi 3.6 per cent and SoftBank Group 6.3 per cent; Panmure Liberum's 6 billion pounds estimate against Healey's 22.7 billion pounds of room is the same coupon on the treasury side. The Bank of Japan rate is still 1 per cent; that buffer holds through the 17 and 18 September meeting. Saunders's pace of sales, which could move from 70 billion pounds to 50 billion pounds, is the named second buffer on the United Kingdom side. If Japan's 10-year yield remains at or above 3.02 per cent after the Bank of Japan meeting on 17 and 18 September, the next readable signal is whether the Nikkei 225 and the Kospi print fresh session losses on the days the 10-year Japanese yield makes a new high — that is, whether the liquid door remains equity.^{[1], [2], [3]}