Accountabilitynet Limited’s Post

Share Market volatility Investors were: Borrowing yen (low interest rate) Converting yen to USD (high interest rate) Investing USD into high yield assets (bonds) Profiting on difference between high yield and low cost of borrowing = Margin Trading Then Bank of Japan - raised Interest rates. Institutions needed to repay margin calls. Then Sell something to repay the debt Expect more

Yen carry trade = money managers borrowing yen at a lower rate and then buying stock. When the yen shoots up in value due to the Bank Of Japan raising rates, the trade goes south, money managers face margin calls and then HAVE to sell stock to raise cash. Although recession risk is rising, these particular moves look like monetary mechanics gone awry. We’ve been expecting a market correction and will be looking to do some buying amidst this panic.

+32bps to go on 10s The Yen carry trade is still alive and well, despite the strength of the dollar and Japan pivoting away from YCC (yield curve control). Borrow Yen, invest in US 10s, clip 32bps. The 10-year treasury can rise to 4.95% before it's at parity. 2% loss only.

Carry over trades - which caused global market crash yesterday! when an investor borrow(loan) money in a low interest rate currency like Yen and invest into somewhere with higher returns expectations, and pay back the loan. This was happening with Japanese Yen for a very long time now, untill Friday when Japan's central govt increased the interest rates by 0.25%. Also, Yen got appreciated against the USD from 1 USD = 162 JPY, to 140 JPY. Suddenly all those loans taken in Yen for arbitrage got costly and the Investors' priority shifted to repayment of those by taking it out from the markets world-wide! This also got combined with the economic data from the US On Friday, which didn't look as expected combindly causing global markets correction. #CarryOverTrades Follow for more!

The change in global borrowing dynamics underscores the importance of adaptability in financial strategies. Investors who rely heavily on borrowed capital may now face the challenge of adjusting their portfolios and strategies to account for increased costs. This shift could open new opportunities for those who can innovate and identify alternative investment avenues less sensitive to interest rate changes. Additionally, the situation may highlight the growing importance of geopolitical awareness in investment decisions, as policy shifts in one region can create unexpected challenges and opportunities worldwide.

It seems unintuitive that a small 25 basis point interest rate hike in Japan would spike all risk assets, including tonight's -20% $ETH candle. But you need to understand the way the carry trade works: It's a leveraged unwinding. The quick explanation of the carry trade is borrow at 0 rate and invest in something with higher than 0 expected returns: 1. borrow Yen for nothing 2. buy an asset outside Japan that yields more than nothing 3. ??? 4. profit •Well yes, so long as: - your borrow rate remains low - your collateral is worth something - and the thing you bought with your loan makes money All those things are becoming not-true for the carry traders. •This is why risk assets are taking a tumble. The hidden leverage in the system was the infinite money glitch that was Japan monetary policy. The BOJ was the piggy bank for the world's assets. But the piggy bank just closed. And now--pain. I think the pain is yet to be seen in markets, probably till DOJ announces any rate cuts Its gonna be CHOP CITY, good inflection point for investors but i think most of the markets have topped out Article excerpts by JONWU

Interest Rate Policies of the Bank of Japan: The interest rate policies implemented by the Bank of Japan (BOJ) play a significant role in the performance of these ETFs. Japan’s long-standing negative interest rate policies and quantitative easing programs have positively impacted the stock market while keeping bond yields under pressure. #economy #marketing #management #investing #finance #data #usdjpy #banking #tokyo #japan

Yen Carry Trade It involves borrowing the yen with super-low interest rates, then using it to buy currencies with better yields. The yen has been the funding currency of choice for carry trades in U.S. dollars, Mexican pesos , New Zealand dollars and some others. The trade involves buying the higher-yielding currency with the borrowed yen to invest in bonds or other money market instruments in that currency. At the end of a usually short-term trade, the investor converts the dollars or pesos back into yen, and repays the loan. How Does It Turned Into Nightmare?? The Bank of Japan raised interest rates for the second time since March, pushing the yen even higher (and thus making it more expensive to pay back your yen-based loan). Meanwhile, the dollar weakened as the Federal Reserve strongly hinted at looming rate cuts, and US tech stocks declined. If you’re a carry trader, you headed for the exits. But so did everyone else. This is where it gets messy. This would lead in the reduction in profit margins and would also led to fall in Japanese Stock Market and US Stock Market because Investor started to look for safe heavens. Credit:CNN #carrytrade #yen #dollars #FED

The carry trade has been a popular strategy for profiting from interest rate differences by borrowing in low-rate countries, like Japan, and investing in higher-rate currencies, like the US dollar. The original yen carry trade emerged in 1999, and has grown significantly. However, recent changes, including a rate hike by the Bank of Japan and anticipated US rate cuts, have led to market volatility and highlighted financial fragility. Read more about the yen carry trade here and why it has caused such a market fuss: https://lnkd.in/gED75Aag #finance #marketvolatility #yencarrytrade #globaleconomy #investmentstrategy #riskmanagement

May 30, the 10-year Japan government bond yield rose to around 1.1%, its highest level since July 2011. In the U.S., persistent high inflation and cautious sentiment towards interest rate cuts have caused long-term bond yields to rise. Additionally, concerns about potential interest rate hikes and reduced bond purchases by the Bank of Japan are contributing to financial tightening and increasing long-term rates. Consequently, banks have raised their fixed interest rates for 10-year housing loans in June. - Mitsubishi UFJ Bank: 1.2% (up 0.14% from the previous month) - Sumitomo Mitsui Banking Corporation: 1.75% (up 0.05% from the previous month) - Mizuho Bank: 1.55% (up 0.05% from the previous month) - Resona Bank: 1.83% (up 0.05% from the previous month) The apartment loans might be even higher.