Thread by @acrossthespread

🇯🇵BOJ POLICY (thread)

YCC Policy Unch BUT-

(re-re-reading to make sure correct, & if I am..)

PERMANENT FIXED RATE OP??

“…offer to purchase 10Y JGBs at 0.25% every business day through fixed-rate
purchase operations, unless it is highly likely that no bids will be submitted.”

https://twitter.com/bank_of_japan_e/status/1519514253954146304

2/ Evolution of official language on BOJ YCC Fixed Rate Ops (offer to buy unlimited JGBs at specified level- currently 10y JGBs at 0.25%)

•Jan21: “❌upper limit”
•Mar21: “±0.25% range” (only time “0.25%”)
•Apr21 - Mar’22: “❌upper limit”
★Apr22: “offer to buy at 0.25% daily”

3/ Markets-wise, whats insane / what I’ve been flagging about this current moment + next 2-3 hours is:
WTF does a 🇯🇵asset mngr do right now??

Need to decide on buy/sell executions before mkt closes for 1wk

BUT
Need to wait for Kuroda press conf 3:30pm post-close

👆Keep in mind

4/ 🇯🇵1:30pm -1.5hrs mkt close, 2hrs until Kuroda press conf

Markets are in such panic that they’ve made half-measure divergent moves & frozen still, ¥↓ but can’t break thru 130, USTs flat
↓
“Straddle” trade working:
Long calls 10Y UST Futures
Long puts ¥ Futures

5/🇯🇵”¥ bear / UST bull straddle” trade

Impossible to tell ATM but my initial kneejerk theory:

JGB 10y yield “0.25% forever” policy may be bullish USTs & ¥ (esp once GW over & full informed on Kuroda + May FOMC 🇯🇵 back)

🇯🇵domestic yields cap w/o “better price later”→ buys USTs

6/ (👆cont)
BOJ daily fixed rate op in practice is no diff from existing YCC policy.
Now they just dont have to keep announcing each time- which then removes BOJ skeptics (& therefore volatility) from JGB mkt
No more need to make day to day buy/hold/sell decisions: mkt floor set

7/ USDJPY 130 print

< 1hr till Kuroda

#BoJ #日銀　＃円安

8/ While USDJPY > 130 for 20y high, it’s only ~1%, “only” relative to what was announced.

But nonetheless, 🇨🇳yuan not to be outdone in weakening

& while USDJPY +1% on BOJ policy is almost nothing, +1% (or close to) on USDCNY, USDCNH is massive. Let alone no 🇨🇳 announce catalyst

9/ Assuming majority of you reading this aren’t following Kuroda press conference along in Japanese:

The bloomberg 1 line translates are fine

But the live comments from 🇯🇵retail on YouTube stream (who are also very much FX trading this now) across channels are amusing/useful👇

10/ …so here’s my “contribution” & color of 🇯🇵 retail right now (these are just random comments/summaries among sea of them scrolling by fast for our amusement- don’t read into it)

•Seems EVERYBODY is FX focused & directionally 1 sided → long USD (& “lol”-ing)

(cont..)

11/ (🇯🇵retail live comments)

•”USD 140 by tonight” ← “no idiot, it’s obv >150 tonight”
•”Kuroda WATCH THE CHARTS while you talk!”
•”little Kuroda, stop clicking your pen & focus”
•”now I can’t go overseas for golden week” (many versions of this, kidding & not)
•”yen = 🗑”

12/ (🇯🇵retail live comments)
•”Kuroda, japan is getting eaten alive”
•”fuck it, I’m going levered long ($)”
•(response👆) “lol I’ve opened & closed out levered long $ for 6th time today”
•”the more PnL I make to spend for GW (long $), the more worthless my gains are. Sad/fun”

13/ (🇯🇵retail live comments)
•”Today was the funeral of yield lol”
•”I bought a safe (lock box) when you cut rates neg to protect my cash from getting taxed. Now/today my safe box has appreciated more than my money in it”
•”Scrap neg rate! Theres no interest burden at 0% too!”

14/ fucking hilarious thank you 🇯🇵retail 😂
& I must say- 🇯🇵 retail (at least ones that watch BOJ press conf live & trade) are VERY sharp bunch + very developed pragmatic trading mentality:
Rooting for/urging ¥↑, while shorting ¥ profit(i.e. hoping against position for 🇯🇵 sake)

15/ 🇯🇵millenn retail traders have few year head start on 🇺🇸Reddit apes (b/c 🇯🇵”new” retail pulled into markets via BTC ‘17, not $GME ‘21), but tbh I was surprised at how advanced they got- they’re like mini cross asset HFs. Also was very cool to see a ton of women as % of total

16/ Just released by BOJ- how JGB buying ops work now

In addition to offer to buy unlimited 10s at 25bps on 3 on the run issues every day at 10:10am (fixed rate op), BOJ is still doing competitive outright (scheduled) buying across the curve qty stepped ↑

See 2 screenshots👇👇

17/ Weird/potential concern (not big deal) w/ above 2 on new JGB buy procedures:

Says new daily Fixed Rate Ops start Mon May 2- which is during Golden Week, when cash JGBs should be closed (JGB futs trade). & BOJ also closed.

So is cash JGB mkt open Mon or not? Matters a lot 🌎

🇯🇵BOJ: Why You Should Give a F (yes, you)

BOJ (via¥) is moving cross asset🌎mkts:

FX (EUR, GBP, RMB)

Equities (not just NKY +3%, but “real” stocks)- NDX futures >2% on day (& no, it’s not “Meta” earnings suddenly kicking in @ 2am EST)

USTs whip ↑↓

Crude (via $)

BTC↑

3 futures markets most directly relevant/impacting:

•JGB futures (big rally on volume)

+

•UST futures (initial surge on volume, then pull back, then resume steady ↑)

& as JGBs rally (yields ↓) & USTs pull back (yields ↑), 🇺🇸-🇯🇵yield spread widens
↓

•¥ futures sell off

BOJ’s “dot plots”

Obviously BOJ doesn’t do FOMC style dot plots, as that would imply having the option of expressing policy removal at some future point

Closest thing we have are board members’ collective CPI outlook, w/ 2% & sustained as “lift off zero” fairytale scenario

https://twitter.com/Bank_of_Japan_e/status/1519650144462979073