unintended consequence-- rasing caps to buffer Japanese sales talooks like the boj is about to lessen its yield control program to raise more caps for their sales tax hike later this year. why is this important? the yield control program effects the cost of carry on participants when buying and holding yen. positive usdjpy means participants are selling yen vs usd. however, negative usdjpy means participants are buying yen vs usd. since yen purchases are associated with fear. the yield control program has had an indirect effect on equities globally. i dont think the sales tax hike will be successful due to public outrage. that being said. long term business as usual. but til then the japanese sales tax hike will require yen appreciation which will result in equity volatility by The_dumpster_diver0
Back to our previously schedule programmingUltra accommodation coming from the boj knocking 10 yr back into negative range. This controls the incentive to buying yen and is a psychological lever for equities. How to play short fxy via debits or call creditsby The_dumpster_diver1
Caution rouge robotsFrom post long ago I broke down the significance of the carry trade and it's effect on volatility. With the yen buying being a percieved a fear trade. The positive yield on the jgb removes the disincentive to buy yen thus poor macro data has the ability to have somewhat an effect againby The_dumpster_diver111
Usdjpy-- Japanese 10 year says caution rouge robotsAs previously mentioned risk sentiment/yen buying is controlled by keeping a negative yeild on the JGB 10 year. A negative yeild ensures an instant loser when buying yen. The bullish divergence in Japanese yeild opens the idea of a positive yeild meaning the ability to buy yen without being an instant looser is getting ready to happen. Yen buying is seen a risk sentiment trade so. Caution rouge robotsby The_dumpster_diver0
Carry trade applications and future questionsThrough massive easing and control of the 10 year the boj has power to control yen buying and selling. Negative yeilds mean negative returns when buying yen so it's more optimal to sell yen vs a stronger currency like usd. Ironically the usdjpy is commonly used as a risk on risk off trigger for equities. So negative carry usdjpy=yen buying hence fear. Positive carry=yen selling. When observing this keep in mind the Japanese 10 year and the psychological factor that a positive and negative yeilds play on yen. Keep in mind Asian markets are closed til next week so expect little to no change in Japan 10 year. Sales tax changes in Japan later this year may cause interesting implications for this trade. Faliure may result in steeper easing. Success may result in less easing. Prolonged easing will result in default longer term. by The_dumpster_diver0
JP10Y Long Last trade took less than a day to hit the target. Let's see how this one plays out. See the "Related Ideas" belowLongby khansalarehsan6
Bond market vs BOJThe JP10Y yield broken the 10-year descending trendline and sixteen-month symmetrical triangle pattern too. A well move above the Feb 2017 could resume further rally to 0.32 and 0.53Longby KeytoMarkets2