Head to https://gamma.app/signup to check out GAMMA and start designing today! Japan may have finally figured out why the yen keeps getting crushed. And no — it’s not because some hedge fund in New York borrowed a few billion yen and YOLO’d it into U.S. Treasuries. That’s the cartoon version of the carry trade. That’s the version financial media repeats because it sounds simple: borrow cheap yen, buy higher-yielding assets overseas, yen goes down. But that is not the real carry trade. Eurodollar University&#x27;s conversation w/Steve Van Metre https://www.facebook.com/FastMoney/videos/japanese-yen-is-flashing-major-warning-sign-for-market-bk-asset-managements-kath/2457269361418309/ https://www.youtube.com/watch?v=YYPAgPp29UI https://www.youtube.com/watch?v=ubDFvdI02EQ https://www.youtube.com/watch?v=Nnad9Bif87o https://www.eurodollar.university Twitter: https://twitter.com/JeffSnider_EDU I’ll also be active on Bravais Social - a new AI-centered social network designed for professionals and knowledge workers. The platform aims to bring together a wider range of tools and functionalities tailored specifically for professional interaction, research, and knowledge exchange in one place. You can find me here: https://bravais.social/profile/edu

Japan Is Trying to Stop the Yen Carry Trade… It Won’t End Well

Eurodollar University

[SPEAKER_A] Japan may have finally figured out why the yen keeps getting crushed. And no, it's not because of some New York hedge fund borrowing billions of yen and YOLOing them into U.S. Treasuries. That's the cartoonish version of what's called the carry trade that you hear in the mainstream because it sounds simple enough. Borrow in cheap yen, reinvest in higher-yielding securities elsewhere. What's really happening is more interesting, more complicated, and more relevant. The real carry trade is much bigger, much deeper, much harder for Japan to stop because it's coming from inside Japan's own financial system. For years, Tokyo tried to fight yen weakness the dumb way by directly intervening in FX markets. I mean, just recently they lit roughly $75 billion of official reserves on fire, flushing it straight down the toilet and got almost nothing for it. The yen kept weakening anyway because they were treating the symptom, not the disease. Now, According to very recent reporting, Japan is finally looking at the real issue: domestic capital leaving Japan. Pension funds, insurance companies, institutional money, the giant pools of Japanese savings that keep finding better returns outside of Japan than inside of Japan. Risk-adjusted returns. That's the real carry trade. And if you understand that, you also understand this: why the Bank of Japan's rate hikes don't strengthen the yen. In fact, under the current framework, The BOJ hikes actually make the yen weaker. The more they hike rates, the weaker the yen becomes, which is the opposite of what you hear in the textbooks.

Japan Is Trying to Stop the Yen Carry Trade… It Won’t End Well

Read the full transcript

The candid version is on a podcast,
not the earnings call.

Japan Is Trying to Stop the Yen Carry Trade… It Won’t End Well

Read the full transcript

The candid version is on a podcast, not the earnings call.

The candid version is on a podcast,
not the earnings call.