YouSaid · the spoken record

Weston Nakamura

lines on the record: 67
first: 2023-01-18
most recent: 2023-01-18
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Yeah, thanks so much for having me. And let's do this again on the meetings are going to get crazier. So let's do this again at the next one. Corota's last one.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“So basically, I was long, and then I just basically took my house money and I just bought puts on that are going to expire a little bit post earnings just in case they say like, by the way, nobody wants to borrow money. So this nin spread just not on the banks. And by the way, we had massive like what?”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Explode higher, you know JP Morgan has treasuries. Yeah, I mean, there's like close to a half a trillion of losses, mostly unrealized on the US bank's balance sheets. And I'm not surprised to hear it's no different in Japan, although probably worse.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Of the steeping of the JGB yield curve, so therefore, you have net interest margin and all that kind of stuff and potential net interest margin. You have something like Bloomberg did some calculation where Sumito Mumitu SMFG, for example, for every 10 basis points increase in 10-year JGB yield is like a 20 billion operating profit positive impact or something like that from NIM and all that. In September of 2022, these three megabanks booked 200 billion yen worth of unrealized losses from JGB holdings because of high yields. That was helpful.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“The e-mini, or like what happened overnight with SPX and the Nasdaq and all that, it is kind of independently trading, but I don't see that happening because I just don't see any sort of inflow into Japan with this kind of broader mentality of the international community thinking about Japan is going to be hiking rates sort of thing, right? And so if that's the broader sort of, if the index is more or less based on foreign capital inflows or outflows and the predominant thinking of the international community is that Japan is going to get more tightened policy, then they're not necessarily going to be going along that. However, I will say kind of as an interesting sort of not trade idea. This is not trade advice obviously, but the bank stocks have been rallying really breaking out to multi-decade sort of levels, right? And they're doing that because you have a steep.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, but like the large ones are MUFG. These are US ADRs too. MUFG, MitsubishiFG, SMFG, which is Simito Mutsu's financial group, and then Mizuho Financial Group is MFG. And so those three have rallied, I don't know, so I had like a 23% gain from when you and I spoke to Monday where I want to close everything out based on this no change out with that head. So those stocks basically kind of kept their moving kind of inverse to the index, the broader index, and then you had a kind of a flip today. But Japan is actually kind of in a weird situation, the equity market, it's actually trading very independently. It doesn't just follow.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Or, like, looking like Argentina as they should, whoa, then go ahead and start selling, right? But otherwise, the Bank of Japan has to keep doing some form of yield trial. You call it whatever you want to, but Japan can't, there's no QT, right? So people are going to be stuck with it. That makes sense.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“For some time, even after with this new person. And then whoever this new person is, by the way, it doesn't matter who it is. It might matter for that short time period, but kind of longer term, you know, like a few months in the role. The ghost of Karota is going to be haunting the Bank of Japan next governor and then the next governor and the next governor in monetary policy and just pan and the world as a whole forever because you cannot undo the policies that he's done. You can't buy half of the sovereign debt market and then start what are you going to do like QT? There is no QT. There's no unwinding. There's no selling JGBs into a market that you've destroyed liquidity on that doesn't trade, that you set the prices on that you won't have and that doesn't exist anymore like if you want you know Japanese yields to be at like 50%.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“All kind of intraday and intraday and intraday. So I couldn't tell you. I have no idea. What I will say is that if they do kind of increase, further increase the bans on yield curve control, which I don't think that they're going to do, but if they do that, it will not be, as just as it hasn't been this whole time because of anything CPI or inflation related, it's going to be because of financial conditions kind of related. And so that's what you have to look at. But I think that they really learned their lesson as like we can't ever do that again is what they're looking at. So I think that you're actually my kind of non-consensus view. And again, this is subject to change because change all the time, but they're probably not going to change anything.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Obviously So A day before you and I spoke last time, I could have given you kind of my thoughts as to what's, you know, I would have said the Bank of Japan is going to wait until the new governor comes in to change things and all that kind of thing. Since that day and then subsequently until current and still, I believe that anybody who's making sort of predictions about what the BOJ is going to do or not going to do over the next meeting or after the next few months or whatever, they're going to have to revisit that because this is something that is the Bank Japan situation is changing on a day-to-day intraday intermeeting basis, right? Like in December, they increased the amount of JGB buying that they're going to do. Then they exceeded that in four days and then they increased it again. So this is literally like they're going like day by day or”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“I mean, like crazy things, he could say something very crazy or not, but just don't let your guard down. He's jumping on a plane for a reason. And he's almost 80 years old, and he's not there to go skiing or something. He tells the foreign investor community, like the foreign international community badly. So keep that in mind in the near term. The story is not over yet. And what do you...”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Last replay ticket, but I seriously doubt that. And let's also keep in mind that this was a guy who would go to Davos to lie about something. Governor Krota, this is from Davos. Governor Krota, are you going to be cutting rates negative or like was there negative interest rates in Japan? No, no negative interest rates in Japan. One week later, negative interest rates in Japan. So let's not forget forget that although he has been very kind of careful about not shocking markets except for December, that he has that in his blood still, and if he's like a second semester senior on his way out,”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Why is he doing that? And because that time frame is also when he kind of would make up his mind as to what he's going to do for today's BOJ meeting. So apparently he has something to tell the foreign international press or the international community foreign financial community, the financial elite about something that he did today such that he had to jump on a plane immediately after the BOJ press conference today. And so let's see what he has to say. Maybe he's just trying to use the last kind of free trip that he gets before he has to start paying for things. The last free plane.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Want Thank you. I appreciate that. And it wasn't difficult to do. It's just because you just have to follow the correct metrics. Get TPI over your head and all that kind of stuff. But yeah, so basically the kind of timeline of events. What I said was the Bank of Japan is going to release their policy, right? When they release their policy, that's going to happen around noon-ish or so. And when they do that, don't read into the market price action because it's not even the BOJ governor Krota's press conference, right? You got to at least wait for that normally. That's how it would be. But I would also say that you also have to wait for this Davos appearance that he's making because apparently he just did this within the last 48 hours or so of like, you know, booking this flight to Switzerland and going to make this Davos appearance.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“I don't know who the successor is, and I don't think it matters. I'll get you why. But Karota has. He has two meetings left, but he is speaking at Davos on Friday. And that is a significant sort of thing because I was talking about this on a, I had a long Twitter spaces that you should check out. It was like three hours long with Emma Nealman, but I basically laid out my entire view of what's going to happen today and kind of played out exactly as such.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Japanese insurance companies, pension funds, all that, they've already sold a record amount of their holdings. Now, they still are the largest creditor to the United States. They still hold over a trillion in U.S. treasuries, but they are currently underweight, and a lot of that already took place. Second of all, I'm not sure that they're rushing into JGBs right now because the Bank of Japan just pulled the rug out from underneath them. And if they think that they're going to be doing that again and again and again, and they're on some sort of cycle like that, JGBs are not touchable at all right now. So that's not really happening. So right now it really is just this massively crowded short positioning that you're seeing take place. That's why you get Yen streng strength and Dalaricus. And that's why today when you didn't get a policy change, you didn't get a further policy convergence. That's why you're getting reversals in sort of the”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Because Japanese government bonds are yielding 50 basis points, but also because hedging costs and effects are wiping out all the nominal yield spread premium and all that. And basically take FX risk that's insanely expensive when you can just have FX free be FX free and have the bankage pan backstopping you still with a put, but with a higher yield and all that kind of thing. And so there's this notion there's a lot of this like narrative is now being talked about. The Japanese money coming, like being repatriated, and that's going to flow out of treasuries and it's going to therefore the marginal buyer of US treasuries is now going to be gone, all that might be too, okay? But here's what I'll say to that. First of all, 2022, the Japanese institution.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Either way, whoever the hell prints money or whatever or doesn't print money, it doesn't show up immediately in price action on tick basis, right? So that wouldn't really happen either, right? And so what's going on is basically that. And then the second thing is that I hear about is, you know, shouldn't the yen be appreciating because now you have yield, okay, so yields are higher in Japan for the first time in forever. And so you're going to get this massive repatriation of overseas capital back to Japan because Japan is the largest foreign capital allocator and so they're going to be pulling money out of treasuries out of real estate in Europe out of Australian sovereign bonds out of CLOs or whatever it is. Why? Why? Because”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“There's no, yeah, it's not like someone finds the answer to that question and then they get a reward. It's just like it's... You're debating the holy text, and someone has one interpretation, someone else has another interpretation.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Traders are exiting their positions. They're buy covering. So they're not buying the yen. They're exiting a position, right? So which is a huge difference. And so when you see the yen just rallying like this, just keep that in mind. And when you think of, shouldn't the yen be depreciating because Japan is printing an insane amount of money and all that kind of? I'm not going to get into the whole like central banks do or don't print money in commercial. Like, I'm not going to get into that. Just how about.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Then your song to get a recession fueling creeping. And then you start to suddenly get BOJ to start to lift rates in December. And all of these things are causing this massive, what used to be overcrowded. Now it's becoming less and less crowded, but still has a lot, a huge net short position on positioning on CFTC commitment traders data for this yet short yen futures position. And so when you see yen's strength happening, it's not, it's basically what that is, is that it's traders.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“November 2016 Trump shock election win where you had just kind of macro craziness going on and that exceeded the October 21st 2022 volume exceeded that that was the beginning of this massively crowded short yen position that began to get short covered in other words position exiting buying yen futures and then that basically bled into a series of catalysts that called for the end of this short yen trade the thesis right if the thesis is that there's going to be a hogish fed and a dovish boj and therefore you short the yen well now you're starting to get october cpi coming in at 7.7 then november cpi coming in at 7.1 and so inflation is starting to um you know kind of top out and roll over”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Brilliant strategists and not so brilliant strategists, but people who are talking about like, yeah, October was the top in yields or wasn't the top in yields or whatever it was. I'm always wondering if they're aware of what actually caused that actual reversal. What was the flow catalyst that did that? The Ministry of Finance at that time at 1030 or 11 a.m. on the 21st was a Friday 21st of October. They did their second unilateral intervention intervention basically intervening in foreign exchange markets and they sold dollars, bought yen without the permission of the US Treasury. That's why I'm saying it's unilateral, although they probably had some backroom sort of wink wink that did that. And that basically corresponded with, you could see that like spike in volume on JPY futures. That was record volume. The only time that you saw a volume that the record before that was”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Your doll futures, therefore, everyone's piled into shorting the end. And so that was a very sort of profitable and trade that worked that well. However, in October 21st of 2022, and then you go back to that last chart that you had up, Jack, of Yen Futures and the spot USDJPY. On that day, that was October 21st, 2022, and around 1030 or 1045 or so Eastern time. That was the top tick in U.S. DJPY, okay, or another words, that was the bottom tick in yen futures, and that was also, by the way, the top tick in 10-year US Treasury yields. So keep that in mind because anytime you hear anybody talk about, you know,”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“At what level, at what time. But you see the spike in eurodollar futures, right, short-term interest rate futures, implied volatility. That reflects huge uncertainty of what the hell the Fed's going to do or not knowing what the Fed's going to do. So instead of trying to pinpoint exactly what they're going to do and all that, race traders basically said, okay, let's just take a relative bet. We're going to bet that the caucus Fed is going to be directionally hawkish and the bank is going to be this weird standout dove and just have its yield curve control cap in place and then we're going to bet on policy divergence and that's dollar up that's the end down so therefore short yen futures and that's why you see this that kind of almost a perfect mirror match of cme yen futures prices declining while euro dollar futures implied volatility uh increases it's hard getting hard to do that traditional um instrument uh trading”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so I have no excuse for that. But yeah, so let's just do this. Because I get a lot of questions about why is the yen strengthening? Why is the yen strengthening when the BOJ is printing an insane amount of to support the JJV market and all that? All that's legitimate. And so I kind of just want to walk through like what is basically happening with the end. So if you pull off that chart of the Eurodollar futures implied volatility versus CMEN futures price, that's basically where this story kind of starts. But basically, the short yen trade was for 2022 was the global macro trade of 2022 because it was, like I said, you know, a large part of Fed trade because it was a policy divergence trade. The reason it's a policy divergence trade is because normally rates traders would bet on where short-term interest rates Fed funds or whatever would be.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, the yield can't sell off. The only way for the pressure to release is through the currency valve. But then it rallied again. So it went from 128 to 131 to now it's 128 again. So what happened? That's weird. And again, this is not shown on the chart. So apologies about that. And also apologies to the audience for my audio being bad and maybe awesome.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“They should be, but if the Bank Japan, if the expectation was, if you were willing to short at a price below the floor and then thinking that the floor was going to be lowered, but the floor remained static. You are in trouble, right? Because you were so you were expecting the four to just drop out from underneath, and so your short would be a very profitable position. And if that drop never happens, well, you're going to have to get the hell out of your position and then you have to buy cover and you get short squeezed. And so that's what happened with, you know, JGB's JGB futures, you know, basically limit up today at the PM open and all that. And so it's been a very, very Sort of tough lesson is what I would have thought. But now you're starting to see, and then the yen strengthens off of that because it's basically a reversal of...”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“So that's if you combine the JGB futures, that $100 billion notional per contract that hold four days of just getting squeezed out today, as well as the people that were shorting and keeping the yield, you know, the printed yield of 10-year JGBs above yield curve control cap. That's why you saw policy unchanged and nothing happen and you saw JGB yields collapse into the 30 handle of base points. Like a very sharp move down. Which honestly doesn't really make sense.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Right. So, therefore, the reason that you get prints that four basis points or whatever it is is because the only reason that somebody would do that Is because they believe that in the near future, 50 basis points is no longer going to be the ceiling. They believe that maybe 100 basis points is going to be a ceiling. And so if you short at 54 basis points and it goes 100 basis points, or in other words, if you short at level X or whatever, and then it drops much further, then that's a very, very nice return. And so anytime you see JGBENs yielding above the yield curve control band, you can assume that those are short sellers that are doing that. And they're doing it because they feel that's my fill to get in, but they're going to ditch yield curl or they're going to have to move the band. And so I'm going to make a very, very hefty profit. And so all of that whole week of it trading above, those are also short sellers that got burned today, right?”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“And that's basically the secondary trading market of JGB's ex the Bank of Japan. And they quote prices and you can actually have an execution. And so if you actually have an execution at a level that is at a price level that is below the floor of what the BOJ is guaranteeing the reason. So below the price floor.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Bang of Japan owns, as Jack and I discussed, 80, sometimes 90% and sometimes 100% of a particular issuance, right? Of JGB issue number 364, right? Let's just call it that, right? And so what happens is that you are allowed to, you know, if you want to short something, right, you can actually borrow from the Bank of Japan. So Bank of Japan will lend you a JGB, but you can't borrow from the JGB from the BOJ. You can't borrow Japanese government bonds from the Bank of Japan and then sell or short sell it back to the Bank of Japan in these unlimited fixed rate buying operations. They don't allow that. However, what you can do is you can borrow from the Bank of Japan, who obviously has 50% of or more of bonds outstanding. They have a plenty of supply. You could borrow from them. And then you short sell it in what's called the brokers brokers market, the BB market, right?”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“It's so funny to think of it like in meme terms. But it's true though. How is it possible for, it's a perfectly legitimate question? The Bank of Japan is saying we're bid for unlimited and they can do that. This is an unlimited printing press. So no matter what the amount, the notional amount that the market has to throw at the Bank of Japan, theoretically, there is a cement ceiling of a wall of buying that cannot be penetrated because the Bank of Japan has this unlimited bazooka. So how is it possible that that yields our trading above or price they're trading below the floor of what the bank of Japan is guaranteeing? So the way that the reason that that happens is basically”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“And I found it. That's why I was just downloading that. We got it now. So, yeah, so this is the 10 year yield starting a month ago. So at the very beginning of the chart is when yields shoot up to that 25 basis point thing. And now, you know, over the past week or so, as you said, bonds were actually trading above the 50-point basis curve. So yeah, how does that possible given that the curve, you know, Bank of Japan is saying that they'll buy everything above when it's 50 basis limits and 0.0001, right? And how does that relate to there being naked shorts in the Bank of Japan?”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“I just want to address that. So, the reason that ties into over the last four days, you see, if you just look up like kind of any generic yield on the 10-year JGB, you'll see that I found it. That's what I was.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Basically around these sort of FX levels, it's basically like $100 billion. So the Fed was doing what, $120 billion in a month, right? Yeah, of QE at the peak. So Bank Japan basically was doing what the Fed was doing, but the Fed was doing in one month, they were doing over the course of four trading days, well, one quarter of the size of the economy. So, I mean, it's just absolutely insane amount of hyper QE on steroids that BOJ has been doing. And so you can see in the JGB short selling in the futures, right? And then do you recall Jack the last time you and I spoke, you said that the BOJ can sometimes own more than 100% of an issue. Okay, so I do.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Day. That was a record until the next day, Friday. Last Friday, the Bank Japan sent a new single day record and bought five.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“What was the, I don't know, 11th or something like that. But basically since last Thursday, over the last four trading days, four or five trading days, the tenure JGB yield was yielding above the new 50 basis points so-called yield curve control cap, which is a very weird thing, and we'll get to that in a minute. Over that time frame, this is basically what the Bank of Japan has done. On Thursday alone, the Bank of Japan bought 4.6 trillion yen in JGBs. That was a single-day record. And to put things in perspective, 9 trillion yen is what the Bank of Japan had increased its monthly scheduled JGB buying to in December when you and I spoke last time. Okay, in other words, last Thursday, the Bag Japan bought half of their monthly planned amount in a single”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“So the 10-year JGB futures, I used to trade those when I was at Goldman. And those are one contract is face value is 100 million yen notional per contract. They are massive size contracts. These are huge notional, right? So what I kind of that yellow oval that I've circled there, anybody who shorted JGB futures in that time frame, as you can see with that green stick up front today, you are either done or you are about to be depending on where you shorted, but nobody has made, like everyone got burned from that point forward for the last few days leading into this, right? And let me tell you why they did this, okay? So from last Thursday, whatever the date was on last Thursday, the...”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“And then, yeah, that's a huge move. And then you have more short sellers, more selling, more selling. And so people were still very short at 144, and now it's at 146. And if you're levered a gajillion times, like everyone is in the fixed income markets, you can lose a lot of money.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“And who. So a lot of short sellers of Japanese government bonds. That makes liquidity even worse, right? Because there are no buyers. The problem isn't that there aren't sellers. There's a lot of sellers. The problem is that there are buyers other than the Bank of Japan. So liquidity got even worse. And let's actually take a look at this chart of the 10-year Japanese government bond future, and I'll go to full screen. folks can see this is the price not the yield so these these bonds have some sort of coupon i don't know what they are but the price is 146 for par so in 10 years you get 100 back but you're paying 146 for it because it gives you back a coupon that's that's how bonds work so you saw the huge red candle uh like right below the s in futures that i imagine uh was the decision in december 20th from the last bank of japan meeting and since then those bonds have been selling off right”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“You don't, you're going to be applying a false framework to something and you're going to double down on something that was coincidental. And that's exactly what happened.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Just now, like, yeah, like, you know, Fed is going to be on kind of a momentum either slowing down or speeding up, you know, hiking 25 base points, then 50, then 75, and so on and so forth, right? But that's because you and the Fed are looking at it through the same lens. They're trying to tackle inflation. You're looking at it through the, okay, like this is the goal, this is the enemy and all that. For Japan, from a foreigners' perspective, looking at Japan, BOJ is saying this is nothing to do with inflation and then foreigners are still looking at it through the inflationary lens. And so that's why they're kind of getting it wrong. So all the foreign short sellers like Blue Bay and UBS and whatever from December that did not become widowmakers, they were right for the wrong reasons. And I kind of, that's what I pointed out. Good job having a right trade, but do you know why you had that trade correct?”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so that's, and I'm so glad that you said this, Jack, because you're not wrong to think in that manner in terms of the Fed, the ECB, whoever it is, but you cannot apply that framework to Japan. This is what you and I were discussing last time. They did this for not CPI reasons at all, right? And you don't do the insane amount of QE for a decade to fight decades of deflationary mindset and then just get like a couple of three four handle prints on core CPI and then just ditch the policy. You need to make sure that slow and variable lags. You need to make sure that this is actually going to be sustainable. But if you look at it from kind of like more of a Western sort of central banking modern monetary policy framework, that's how you would think about it too. And the same thing that you just said.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Can I take a guess as to why that happened? Yeah. Okay, shorting Japanese government bonds, the widowmaker trade, shorting the yen for decades, right? But people actually made money shorting the Japanese government bonds over the past month. And so they piled into the trade, expecting that the Bank of Japan would continue to raise the band. And honestly, as a pretty attentive observer of the Federal Reserve, that makes sense to me. The Fed does 25 and then they do 50. What's next? 75. When they go down from 75, what's next? 50. What's next after 50? Almost likely, very likely. 25. They can skip at 25. But that makes sense to me. They'd raised it from the fan from 25 to 50 on, again, not the actual rates, but the band and on the 10 year. So it makes sense to go to 75. So did people pile into this trade and they lost a lot of money”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Since they put this so called remedy into sort of alleviate the worsening, deteriorating financial and the instability that's happening, can I”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Kink in there getting even worse. You have corporate bond issuance that kind of froze up, right? So you had companies like Sumitomo. What if they just do it again? What if they increase the 10-year GDB reference rate? Again, how are we supposed to even price bonds at this point and issue bonds? You're starting to see a potential first corporate Japan default since 2017, which is a company Unizo. And the last company that defaulted in Japan was Takata airbags. That's the maker of airbags that killed people for years and there's recalls after years of years. That was the last bankruptcy. This is the actual, this would be the first actual corporate bankruptcy, not a we killed people with our horrible product, you know, sort of should be out of business bankruptcy, right? So corporate Japan is now starting to kind of face the reality of what a higher yield or a non-free money environment looks like. And so all of this is occurring since”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Term ends In April, but March is his last meeting, and then that's going to be seen as a new sort of policy regime, and they're going to definitely get rid of Yilger Patrol then at that point. But he knows that his last two meetings are going to be just rife with speculation about this kind of change in policy to obviously be more hawkish and dish like these kind of 10 years of experimental levels of radical accommodation. But December was a month where they could do it on their terms. It wouldn't be seen as markets pressuring them to do it. So that's why they did it. Unfortunately for them, it didn't work out that way. And then, you know, the BetS started piling in. And so this is what happened since then, right? So you basically have those two sort of worsening liquidity. You have bid ask spreads kind of widening. You have the JGB yield curve that like.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“When they cannot capitulate, right? And that's ironically the way that it works is that the more that markets are pressuring them to do something, the more that they do not do something. And so December was the one month, you know, Kuroda has three meetings left at that point until he's done Bank of Japan.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“So basically They thought that this is not something that they want to do in December, but they felt they were trying to address this quickly, rapidly deteriorating situation in the functioning of the JGB markets and then thereby the credit markets and all that kind of thing. And they also saw that December was kind of an opportunity to do so because when speculators are betting against Bank Japan and markets are pressuring them and you have the yields on what's supposed to be a yield patrol like right up against that ceiling and you have just general commentary and sentiment of JGB futures and just a lot of speculative bets and not real money bets kind of or real money flows reflecting that.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT