Part 2: the total amount outstanding lent overseas by Japanese Financial Institutions was equivalent to a mind-boggling 144,492,600,000,000 $JPY 😨
And that's only one part of the story. The second part is called "Cross Currency Swap"...
https://twitter.com/DarioCpx/status/1717725925125812613
...for every 1 $JPY borrowed to put in place a carry trade, you have at least 3.5X times (and not 4 because risk is never hedged completely) that volume on top of that in terms of derivative notional! Therefore, there are potentially 3.5 TRILLION $USD eqv. linked to the $JPY carry trade globally.
Part 3: 🚨WHILE INVESTORS DREAM OF SEASONALITY THEY DONT SEE THE BANK OF JAPAN #BOJ NIGHTMARE INCOMING! 🚨
https://twitter.com/DarioCpx/status/1719161799260676152
Furthermore, a good chunk of the global financial system is where it is today thanks to the endless $JPY money printing over the years and the insane scale of the $JPY carry trade. I have already pointed out many times how the #BOJ managed to create the worst possible environment for the $JPY Carry Traders, but now we are extremely close to the moment it all starts falling apart and people might begin to scramble to limit their losses.
How will a $JPY carry trade unwinding work? Follow me:
1 - First, the foreign assets in $USD $EUR but also $AUD , $NZD and $GBP will have to be liquidated. A good chunk of these are government bonds, but a big portion are megacap #stocks like $AAPL or $MSFT .
Imagine selling government bonds right now when most of them are trading at deep discounts below par and as a “seller”...
2 - After selling assets at a deep loss, now the carry trader needs to close its hedging. This means returning the same amount of $USD they borrowed at the very beginning of the trade to the broker that will deliver $JPY to them. Now, here is the big problem, carry traders are deep underwater on their hedging too at the moment because of $JPY (since they were “long” the currency as a hedge) and the Japan yields (since everyone didn't bother to pay extra to get a fixed rate $JPY funding while...
Part 2: the total amount outstanding lent overseas by Japanese Financial Institutions was equivalent to a mind-boggling 144,492,600,000,000 $JPY 😨
And that's only one part of the story. The second part is called "Cross Currency Swap"...
https://twitter.com/DarioCpx/status/1717725925125812613
Part 3: 🚨WHILE INVESTORS DREAM OF SEASONALITY THEY DONT SEE THE BANK OF JAPAN #BOJ NIGHTMARE INCOMING! 🚨
https://twitter.com/DarioCpx/status/1719161799260676152
Furthermore, a good chunk of the global financial system is where it is today thanks to the endless $JPY money printing over the years and the insane scale of the $JPY carry trade. I have already pointed out many times how the #BOJ managed to create the worst possible environment for the $JPY Carry Traders, but now we are extremely close to the moment it all starts falling apart and people might begin to scramble to limit their losses.
How will a $JPY carry trade unwinding work? Follow me:
1 - First, the foreign assets in $USD $EUR but also $AUD , $NZD and $GBP will have to be liquidated. A good chunk of these are government bonds, but a big portion are megacap #stocks like $AAPL or $MSFT .
Imagine selling government bonds right now when most of them are trading at deep discounts below par and as a “seller”...
2 - After selling assets at a deep loss, now the carry trader needs to close its hedging. This means returning the same amount of $USD they borrowed at the very beginning of the trade to the broker that will deliver $JPY to them. Now, here is the big problem, carry traders are deep underwater on their hedging too at the moment because of $JPY (since they were “long” the currency as a hedge) and the Japan yields (since everyone didn't bother to pay extra to get a fixed rate $JPY funding while...
Part 2: the total amount outstanding lent overseas by Japanese Financial Institutions was equivalent to a mind-boggling 144,492,600,000,000 $JPY 😨
And that's only one part of the story. The second part is called "Cross Currency Swap"...
https://twitter.com/DarioCpx/status/1717725925125812613
🚨WHILE INVESTORS DREAM OF SEASONALITY THEY DONT SEE THE BANK OF JAPAN #BOJ NIGHTMARE INCOMING! 🚨
https://twitter.com/DarioCpx/status/1719161799260676152
Furthermore, a good chunk of the global financial system is where it is today thanks to the endless $JPY money printing over the years and the insane scale of the $JPY carry trade. I have already pointed out many times how the #BOJ managed to create the worst possible environment for the $JPY Carry Traders, but now we are extremely close to the moment it all starts falling apart and people might begin to scramble to limit their losses.
How will a $JPY carry trade unwinding work? Follow me:
1 - First, the foreign assets in $USD $EUR but also $AUD , $NZD and $GBP will have to be liquidated. A good chunk of these are government bonds, but a big portion are megacap #stocks like $AAPL or $MSFT .
Imagine selling government bonds right now when most of them are trading at deep discounts below par and as a “seller”...
2 - After selling assets at a deep loss, now the carry trader needs to close its hedging. This means returning the same amount of $USD they borrowed at the very beginning of the trade to the broker that will deliver $JPY to them. Now, here is the big problem, carry traders are deep underwater on their hedging too at the moment because of $JPY (since they were “long” the currency as a hedge) and the Japan yields (since everyone didn't bother to pay extra to get a fixed rate $JPY funding while...
Part 2: the total amount outstanding lent overseas by Japanese Financial Institutions was equivalent to a mind-boggling 144,492,600,000,000 $JPY 😨
And that's only one part of the story. The second part is called "Cross Currency Swap"...