Interesting to note that despite today being very much a "risk-off" day that USDJPY is up about 0.40% to 80.81. In related news 10 year JGB +0.015% to 1.165% according to this delayed quote: http://noir.bloomberg.com/apps/quote?ticker=GJGBBNCH:IND and the 10-year T-bond down 0.108% to 2.99% as per this delayed quote: http://noir.bloomberg.com/apps/quote?ticker=USGG10YR:IND Also I note that the 10 year JGB yield bottomed in early May, whereas the USA T-Bond's yield continued to fall into June. One day does not a trend make, however USDJPY is starting to form a solid base at 79.57 and 80.00. I'll probably revisit the Kyle Bass trade if and when the 10-year JGB goes over 1.35%
"Worst Demand on Record for Japanese 40-Year Bonds; Can Japan Service its Debt? How?" http://globaleconomicanalysis.blogspot.com/2011/08/worst-demand-on-record-for-japanese-40.html
This crisis will depress the entire world. The US, EU and Japan are in horrible shape. Once the advanced economies take a tumble, all of the exporter/emerging countries will implode. The next decade isn't looking so good....
You'd love the children's story about "Chicken Little". Give you something to read in your spare time this summer.
Deflation will benefit western economies. There would be a catalyst to create jobs by repatriating manufacturing industries stolen by Asia and oil exporting countries would suffer also due to declining commodities prices.
"Japan 1% Rise in Interest Rates Away from Disaster, says Kyle Bass" http://historysquared.com/2011/08/0...rest-rates-away-from-disaster-says-kyle-bass/ Japan 5y CDS http://www.bloomberg.com/apps/quote?ticker=CJGB1U5:IND
Bookmarking some Kyle Bass interviews: BBC Hardtalk part 1 of 2 http://www.youtube.com/watch?v=VBWiQlS5Qg0 BBC Hardtalk part 2 of 2 http://www.youtube.com/watch?v=4HW8J59rQNQ BBC Hardtalk entire interview http://www.youtube.com/watch?v=K-F_QF1XTXI related Credit Writedowns piece http://www.creditwritedowns.com/201...dtalk-about-europe-japan-and-hedge-funds.html related ZH piece http://www.zerohedge.com/news/kyle-...put-against-idiocy-political-cycle-its-simple *** University of Virginia Investing Conference Darden School of Business http://www.youtube.com/watch?v=-quUyId2WZ0 related ZH piece http://www.zerohedge.com/news/kyle-...-arguments-status-quoand-why-germany-cant-sav
Interesting to note that despite the prediction for many months / years, JGB 10-year yields are still at roughly 1%. However Bass makes a good comparison with Italy - and how things have unraveled in that country in 2011. He points out that due to the higher debt burden (measured in debt to GDP), Japan will face problems based on a smaller rise in bond yields. I think he mentioned that the tipping point at which government revenues equals interest payments on debt (ignoring all other govt expenditure) is at a bond yield of about 3%. This is obviously much lower than the levels at which PIIGS countries are in "bailout territory", being at roughly 7%. As for how I'm playing the "Japan trade" - I'll happily wait for the 10-year to go above 1.35% or 1.50% and then sell the JPY against something (probably USD). As Martinghoul points out - the Japan situation could continue as is for many more years without bond yields rising dramatically.
I've seen quite a bit of talk on TV about how the recent increase in German 10 year yields resulted in 10 year Bunds (briefly) yielding more than UK 10 year Gilts. A good comparison is the period from late October ("Greece is saved") to now. http://www.bloomberg.com/apps/quote?ticker=USGG10YR:IND US 10 year late October roughly 2.40% down to 2.04% now http://www.bloomberg.com/apps/quote?ticker=GUKG10:IND UK 10 year late October roughly 2.60% down to 2.37% now http://www.bloomberg.com/apps/quote?ticker=GDBR10:IND German 10 year late October 2.20% up to 2.33% now http://www.bloomberg.com/apps/quote?ticker=GJGBBNCH:IND Japan 10 year late October 1.05% up slightly to 1.06% now So while "safe" US and UK bonds have seen yield declines, 10 year JGB yields are roughly flat in the same period. Not enough evidence for me to start shorting JPY as yet, but possibly maybe possibly maybe a sign that JGB yields will not fall much below 1% in the months and years to come.