Market Structure Notes — Helmholtz Watson TL;DR The Setup The shift is no longer theoretical. In recent weeks, Japan has intervened in currency markets after the yen weakened beyond 160 to the dollar, while domestic bond yields have risen to multi-decade highs. This combination—rising yields, currency instability, and policy hesitation—is beginning to change global capital flows in real time. Across this series, a consistent theme has emerged: All of that explains the domestic story. But there is a global layer: … Continue reading “Japan Is Repricing Global Rates”
The US Dollar Flexed Last Year, What is Ahead?
The US Dollar continued its rise with yields and safe haven sanctuary in 2024, thwarting the BRICS declaration of the end of the greenback. It remained a source of stability as instability attained momentum globally at the “periphery.” The dollar also got sought for carry trades such as the Japanese Yen and Mexican peso though these featured their own moments of extreme volatility. Yen weakness provided key support to dollar melt-up dynamics with BOJ slow-motion “normalization” in a world of … Continue reading “The US Dollar Flexed Last Year, What is Ahead?”
Understanding Carry Trade Risk, a BOJ Yen Case Study
When markets get all one way, over leveraged and participants drinking the same cool aid any quiver against the grain can quickly become a shake. Essentially the carry trade is funding an investment from a cheaper source, in this case the Yen with negative interest rates and buying an asset with positive returns. The deeper and longer the carry trade goes on the natural motives of risk and greed entwine and when it goes wrong is amplified in low liquidity … Continue reading “Understanding Carry Trade Risk, a BOJ Yen Case Study”
Bank of Japan Maintains Status Quo, Core Inflation Forecasts Trimmed
The Bank of Japan at its January monetary policy meeting maintained existing policy as widely expected. The BoJ kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield unanimously. Previously the BoJ adjusted the settings by shifting the hard ceiling from 0.50% to 1.00% in the yield curve control band of +/- 0.50%. No change to core-core inflation forecasts, but core inflation forecasts were trimmed. Bank of Japan Governor Ueda’s press conference dis … Continue reading “Bank of Japan Maintains Status Quo, Core Inflation Forecasts Trimmed”
Iron Ore Prices Retrace 12% from Two Year Highs, Dragging Aussie Dollar Down
Iron ore prices have fallen over 12% from a two year high earlier this month over $US145 a tonne to $US127.5 on Tuesday. Prices had risen on expectations of healthy iron ore demand for winter restocking amongst growing optimism that Beijing’s latest round of stimulus to revive China’s troubled property market. China has continued to struggle; shipping has been impacted by the Red Sea attacks as a result commodity prices including iron ore have sold off. Commodity price sensitivity is … Continue reading “Iron Ore Prices Retrace 12% from Two Year Highs, Dragging Aussie Dollar Down”
Bank of Japan Governor Kazuo Ueda Leaves Options Open, Will Give No Preemptive Warnings
Bank of Japan Governor Kazuo Ueda was stoic in declaring the BOJ is to keep its options open at the follow up press briefing after the central bank’s two-day meeting. Perhaps in deference to the Fed and ECB telegraphing intentions he added that policymakers were unlikely to give an explicit warning of an impending rate hike. “There isn’t much likelihood of us suddenly announcing that we’ll raise rates a month in advance,” Ueda said. Earlier the Bank of Japan maintained … Continue reading “Bank of Japan Governor Kazuo Ueda Leaves Options Open, Will Give No Preemptive Warnings”
Bank of Japan Maintains Stance Leaves Negative Rates and YCC 1% Ceiling Rate Unchanged
The Bank of Japan at its December monetary policy meeting maintained existing policy as widely expected. The BoJ kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield unanimously. Previously the BoJ adjusted the settings by shifting the hard ceiling from 0.50% to 1.00% in the yield curve control band of +/- 0.50%. The yen weakened, a move higher for yen crosses. Japan’s currency fell as much as 1.3% to a one-week low … Continue reading “Bank of Japan Maintains Stance Leaves Negative Rates and YCC 1% Ceiling Rate Unchanged”
Yen Rallies After Japan’s 10-year Government Bond Yield Surges on BOJ’s Ueda Comments
Bank of Japan rate hike speculation fueled big moves in Japanese Government Bonds and the Japanese Yen this morning, the Nikkei Dow also fell 1.8% through the turmoil. Japan’s 10-year government bond yield surged above 0.75%, rebounding sharply from over three-month lows. The yen appreciated from about 147.3 to 144.7 USDJPY for a 1¾% gain. JGBs bear steepened with the 2s yield up about 4bps and 10s climbing 11bps. Bank of Japan Governor Kazuo Ueda before Parliament testified ambiguous guidance … Continue reading “Yen Rallies After Japan’s 10-year Government Bond Yield Surges on BOJ’s Ueda Comments”
Moody’s Lowers Outlook on US Debt to Negative, Towards Fitch and S&P Global Downgrades
Rating agency Moody’s lowered its outlook on the US credit rating to “negative” from “stable”, pointing to a sharp rise in debt servicing costs with higher interest rates and “entrenched political polarization”. The move came after US markets had closed for the weekend. The move followed Fitch and S&P downgraded the US. The credit ratings agency maintained the USA’s top Aaa rating but changed its outlook to ‘negative’. Moody’s is the only of the three big credit rating agencies that … Continue reading “Moody’s Lowers Outlook on US Debt to Negative, Towards Fitch and S&P Global Downgrades”
Yen Falls After Bank of Japan Changes Language Around 1% 10yr JGB Cap BUT No 1.5% Extension
The Bank of Japan as widely expected kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield unanimously. The BOJ did not extend the cap to 1.5% as speculated earlier but instead formalized the 1% cap. Previously the BoJ adjusted the settings by shifting the hard ceiling from 0.50% to 1.00% in the yield curve control band of +/- 0.50%. The yen weakened, move higher for yen crosses. The yen fell to fresh … Continue reading “Yen Falls After Bank of Japan Changes Language Around 1% 10yr JGB Cap BUT No 1.5% Extension”