Near the inner edge of the plasma sheet, where the geomagnetic field transitions from dipolar to tail-like, very low values of the northward component of the field (Bz) are known to be occasionally exhibited, particularly in the substorm growth phase. It has been suggested that this may be a signature of a localized magnetic field dip, which are notoriously difficult to observe in situ. The existence of these localized minima is significant as they would be ballooning-interchange (BI) unstable. Previous work has investigated BI instability using localized particle-in-cell simulations with an imposed Bz minimum as an initial condition. However, evidence of the existence of localized Bz minima and BI instability at their tailward edges has been very limited in self-consistent global magnetosphere simulations. In this presentation, we demonstrate that the elusive nature of the instability has been due to the insufficient resolution of previous simulations. We present a highly-resolved global magnetosphere simulation, using our newly developed code Gamera. In a synthetic substorm simulation we demonstrate the formation of a Bz minimum localized in radius, 8-10 Re from Earth. The region becomes BI unstable in the substorm growth phase, leading to the formation of earthward and azimuthally propagating bubbles, distinct from those that form further downtail and become bursty bulk flows. These bubbles generate field-aligned currents and optical auroral signatures, similar to those observed on the ground and from space. We discuss the physical mechanisms for the formation of the localized Bz minimum by magnetic flux depletion, analyze the nature of the instability, characterize both magnetospheric and ionospheric signatures of the unstable region, and compare them with those observed.