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

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“Since then, and clearly that kink has gotten worse. So that didn't really work out. And then you have this other chart of worse and liquidity, right? And you're looking at an average bid ask spread on JGBs, which again, not the most liquid, but they're, you know, so they're getting, I mean, the bidesque spread is just getting wider and wider, which means there's just kind of less trading liquidity that that's happening. And this is all because of a gigantic non-economic whale in the market. It's known as the Bank of Japan, like buying up JGBs. But these are the interesting.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“The 910 spread is inferred. Yeah, yeah. And so that kind of kink is very what that is, what you could visually see there is that is what yields curve control specifically targeting and concentrated unlimited buying at the 10-year tenor. That's what comes of that, a shape like that. So they are trying to kind of smooth that out because that's causing all kinds of problems in terms of just general trading of bonds when they do trade, right? And since then, the black line is one month or one policy meeting.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so you'll see that this is the day before the December policy meeting where they kind of shocked everyone. That's a very messed up looking yield curve, right? Because you have the eight-year tenor, the nine-year tenor, not only yielding above the 10-year, but those were yielding above the 25 base point yields curve control cap on the 10-year. That's a very sort of messed up thing. Yeah, you have the nine year.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Kind of policy flexibility that's what they were going for. Unfortunately for them, the results of that remedy actually ended up becoming since the last time you and I spoke to now. That actually ended up just opening this Pandora's box of fueling these short sellers into thinking like this is capitulation BOJ is throwing in the towel and so you know let's just keep shorting the JGB market and all that and meanwhile you know and they've been under like crazy attack since then just to just to kind of like I don't know if you have those charts Jack but of like the kind of the financial conditions or not the financial conditions I'm sorry like the distortions and like the the JGB curve for example yes yes yeah”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“33 down year to date throughout 2022 as the worst major form of currency and all that kind of thing. And they were just like, full stop period, we are not going to move on 25 basis points. That is the cap on yield curve control for the 10 year yield on JGBs. And then suddenly in December, they increased that to 50 basis points. And that's what shocked everybody. And the reason though they did that is not because of any CPI sort of related matter. It was because of there is like a rapidly deteriorating financial, not financial conditions, like financial stability or instability and kind of bond market functioning and market functioning in general. And that's what changed. And that's what needed to be addressed. And so that's why they had to do that. They had to just get more sort of.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Piers worldwide. So people are basically looking at it through the lens of Fed ECB sort of thing, right? Inflation is going up. You need to hike rates and combat that. And stop with this insane QE. And insane it is. But the reason that that's a problem is because people are not looking at the correct metrics. They're not looking at it through the correct lens, right? As you and I had discussed last time, the reason that they, and they explicitly said this too, right? This is not like brain surgery. All you have to do is just not automatically assume that all central bankers are lying all the time. The reason that the bank Japan suddenly had to, after a year of just being very stubbornly holding 25 base points cap, no matter what, at the expense of the yen, getting crushed.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“The kind of international financial community, not just hedge funds too either, but a lot of hedge funds and the domestic Japanese community too, institutional community are basically saying like, okay, that December yield curve control band widening, that was like the start of this whole new era. They're going to be forced to, they're going to be armor is going to be twisted into joining, stopping an outlier, join the rest of the global DM sort of central banks and hike interest rates or like, you know, tighten your financial conditions. You are now experiencing inflation. There's a potential forehandle on CPI coming out tomorrow. Forehandle is a big deal in Japan, even though it's like half of that.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“They'd be forced to Yeah, so the yen we can get into separately, but just for now, for just talking about yields, sovereign bonds fixed income, because this impacted treasuries and everything too. But basically, the Japanese government is the most indebted in the world with a 260% debt to GDP. And like we discussed last time, you can still borrow money for a quarter of a percent or now a half a percent for 10 years out, whereas the United States Treasury, these risk-free treasury, has to pay 400 basis points or 300 basis points or whatever for just like a month or two out, right? And so that doesn't make any sense. But it makes sense in the sense that the Bank of Japan is the most intrusive central bank, a most aggressive QE on steroids, central bank out there. And so basically...”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Japan did absolutely nothing. Their policy was completely unchanged regarding yield curve control, and that caught many players offside. So people were betting that the Japanese yen weakened, betting that it would strengthen and it didn't because if interest rates are very low, money can just leave the country, right? So Bank of Japan defended their bond market at the expense of their own currency. Is that safe to say?”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Right, so JGB is a Japanese government bond. They're targeting the 10-year JGB. And by widening the band in December, because the pressure on rates is upward, not lower, basically all tenure government bonds we're now trading at 50 basis points, and the expectation was that they would allow JGB yield to drift even higher. And in order to defend the yen, so that would strengthen the yen, and yields would be able to rise. And when bond yields rise, the price of bonds go down. So when you're saying short sellers, we're not talking about AMC here or GME or Tesla. We're talking about, yeah, shorting a bond. And when you short a bond, you make money by, you borrow it, and then you sell it, and you make money if you can buy it back at a lower price. So if you buy back at a higher yield, that's buying it back at a lower price, but they were not able to do that Weston because the bank of”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“So, policy unchanged does not mean kind of sanguine markets at all by any means. There's a lot that certainly happened. A lot of people kind of blew up today.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Surprise increase in the yield curb control trading ban is the beginning of this long process of this Japan unwind of kiwi of these like you know this this unprecedented decade of QE and that is the last major central bank to you know remove accommodate of policy and now we are in a total regime shift as you know on a global level and so on and so forth and we're going to double down on our bets that worked out on in December and just keep shorting the bond market the JGB market and so on and so forth and as you and I had discussed there were reasons that BOJ did that and then the people that were calling for this and betting on it were looking at completely different reasons and that is why they did not see that today the BOJ is going to be policy unchanged.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“So basically, just like you said, since last time we spoke, right? So BOJ shocked markets by doing something. Today they shock markets by doing nothing. But by doing nothing, I mean, yeah, so yield curve control policy was left unchanged. That was not what was expected by market participants. Now, that's what was the 40 economists except for city group. 40 economists were saying they were predicting this as well, but that's just 40 people in offices. And I'm talking about actual market participants and market positioning and market activity that's been going on. They begged to differ and they were made once again widows by shorting JGBs and the JGB market and JGB futures. And thinking that there was going to be December sort of”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Negative Yeah, so first Jack, I just want to apologize for interrupting your vacation. That's not like a background thing that you're really on vacation. So thank you for making the time. But it is important. No worries, man. Yeah.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“Weston, the last time we spoke, the Bank of Japan, I was going to say the Fed, not their targets, but their ban. So basically the target is still zero on their 10-year JGB yield, but the band was negative 50 basis points to 50 basis points around zero. So basically everything was trading at 50 basis points, and we are not talking about like, oh, the Fed's racing to 3%, the ECB's racing to 2%. That's all overnight rates almost all the time. The Bank of Japan's rate is at negative 0.1%, 10 basis points. That's the overnight rate, I think overnight. We're talking about yield curve control where you actually, the central bank targets a particular yield on a government security that has real duration, like a 10-year Japanese government bond market. So Weston, what happens since then? What were the expectations leading up to the Bank of Japan meeting that just happened?”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“They basically were the short sellers. I don't know who specifically are, but there has been an insane amount of short selling. This is one of the charts. I don't know how do I reference a chart to you? Just tell me.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT
“But that's like a dog that didn't bark is like nothing happened as a result. Not like a nothing happened. Like a bomb didn't go off. But people got destroyed today in markets.”
2023-01-18 · Forward Guidance · Bank of Japan Widow-Makes Once Again | Weston Nakamura · IDENTIFIED FROM THE TRANSCRIPT