FX: 🇨🇳🇯🇵🇺🇸 Cross Asset Tie-Ins (thread)

Meltdowns in #SPX #NASDAQ $LUNA $UST #BTC & some commods (metals)
&
Buying in 🇺🇸Treasuries (“USTs” from here forward, not ref to Luna $UST) & JPY, as 🇺🇸CPI again↑

👆Each of above have their own story- but just to show charts on CNY JPY👇
1/
First just note April 20th (marked as red line on charts below). This date/event was the last time 🇯🇵JGBs were (perceived by some to be) “freely” traded- as in, no pre announce by BOJ to cap yields

Post 4/20 BOJ cap yields “forever”
& this is when things changed cross asset👇
2/
By removing day to day “will/won’t they” uncertainty BOJ (knowingly/not) shifted relentless & historic 🇯🇵¥ selling → 🇨🇳yuan selling

& yuan selling since 4/20 has been alarmingly sudden & sharp, w/ global cross asset market impact Image
3/Stocks
See 3 charts👇 #NASDAQ futures vs USDCNH (inverse, so “USDCNH ↓” = yuan ↓)

NDX sell off started long before any CNY stability disrupt, so NDX / risk asset selling happens for various reasons simultaneous & interchangeable

Since 4/20 its been yuan led, near tick-tick ImageImageImage
4/ Crypto
Luna UST story is wild & incredibly significant in itself. & yes idiosyncratic flows occurring.

But a -$40bn vanish doesn’t happen in vacuum, I don’t care what asset it is, it has impact/being impacted

Just to point again to 🇨🇳yuan

BTCUSD & CNHJPY👇(only 1 bottoming) Image
5/ 🇺🇸Treasuries

10Y UST yields & USDJPY (UST & yen futures) have been directionally lockstep, & still are intraday (chart 3: 🇺🇸CPI release👇)

But since 4/20, USTs ~bottomed while ¥ hadn’t (yet), & USTs & ¥ began diverge

As per my “straddle” trade:
UST calls & JPY puts ImageImageImage
6/ Treasuries cont

Lot of talk of 🇯🇵 FX hedging costs ↑ is preventing 🇯🇵 from buying USTs

As I’ve been saying- yes prob for some, but def not all (🇯🇵 investor ≠ monolith). 🇯🇵 buying USTs unhedged happens (hence straddle trade)

YTD: if long 10y UST from 🇯🇵 ❌hedge, PnL = flat Image
7/ Commods (metals)

Gold, silver, copper (& others) sold off from same starting point: 4/20👇

Cooper especially has been getting slammed as yuan getting killed

Just closed out long puts on HG copper futures as approaching $4 level ← “short yuan” play

ImageImage
8/
Crypto comm, stock investors, bond traders, commod specs/producers- each have own very real & legitimate thing happening. Not trying to diminish anyone’s very real issues

But when emotionally invested everything seems to revolve around your thing
Just don’t miss big pic too👇 Image
How timely (& frankly not useful sorry to say)

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More from @acrossthespread

May 4
Thanks to @WarrenPies for the pre FOMC Daily Briefing - some follow up charts & new YouTube video in thread below @RealVision 👇
1/Just a reminder of risk parity strategies (long equity + levered long bond)

Realized vol up

Forced unwinds/selling

More realized vol

More selling

SPX realized vol vs SPX daily % ∆ from chart maestro Craig @t1alpha 👇
2/ We’ve seen periods of equity vol before (obviously), but they were in short bursts & were BTFD moments

What’s different in ‘22 & why this time hasn’t been BTFD, but rather a sustained selloff YTD is equity vol rising alongside bond vol, which supports more equity & bond vol
Read 11 tweets
Apr 28
🇯🇵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.”
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
Read 20 tweets
Apr 27
USTs/rates & ¥ heading into 🇯🇵BOJ tomorrow, followed by 🇯🇵 Golden Week holiday starting Fri~next Fri 5/6 (but who works the Fri of a week long break)- so really from this Fri ~ Mon 5/9, or 11 days (6 trading days) absent 🌎’a largest foreign capital allocator

(Thread)
1/ 2021
Was a similar market setup to current at this time of year

From Jan’21 (start of 🇯🇵final quarter of FY ending March), 🇯🇵 sold nearly ¥4tn foreign bonds in final weeks of FY Feb-Mar’21. Seasonal window dressing accelerated by broader selloff from hawk Fed

$/¥ & 10Y UST👇
2/ 2021
US 10Y yields & USDJPY surged over final quarter of FY20, also aided/driven by hedge funds starting to aggressively short ¥ futures (position that’s still on & only grown since)

UST & ¥ turning point: 4/1, start of new FY21

Re-reversed into Golden Week May’21
Read 6 tweets
Apr 26
🇯🇵🇺🇸“Straddle” Trade Update:

1/ On @RealVision Daily Briefing w/ @42macroDDale on 🇺🇸CPI day, I pointed out that UST & JPY’s airtight correlation was (ever so slightly) starting to decouple - & that matters, as..

Long JPY puts gains > Long UST Calls losses (finally)

Due to… Image
2/ YTD: 🇯🇵BOJ announces fixed rate ops 11x, offering to buy unlimited JGB 10s @ 0.25% each time. Results?

•1x in Feb ←caps 🌎 yields

•4x in Mar ←caps only 🇯🇵 yields while 🌎 yields surge upon 🇯🇵selling USTs ←crushes ¥, ←crushes USTs, ←crushes ¥

•7x in April…👇 ImageImage
3/ BOJ vs 🇨🇳

•7x in Apr ←caps 🇯🇵 yields (so far), ←🇯🇵caps 🌎 yields (so far), stabilizes ¥ (so far), ←crushes 🇨🇳CNY, ←pulls down 🌎yields (so far)

Mkt shifts from selling 🇯🇵¥ & 🇺🇸USTs → short covering ¥ & USTS, & selling 🇨🇳RMB & 🇨🇳assets → back to “safe havens” Image
Read 6 tweets
Apr 25
PBOC CUTS FOREX RRR BY 1 PERCENTAGE POINT - BBG

👆This matters

1/
Was JUST about to tweet a thread to highlight 🇨🇳CNY vs both USD & JPY- will do so anyway but note all charts below in thread are pre PBOC RRR cut just now (now mkts reversing atm post RRR cut)

🇨🇳 FX MAJOR move↓ Image
2/ Intraday snapshot during Asia hours of FX. ¥ strongest major FX vs USD, strength in 2 waves:

1) ~10:15am🇯🇵, upon 🇨🇳PBOC daily CNY fixing (AUD slammed)

2) Just after 🇯🇵mkt close / early 🇪🇺🇬🇧 hours as EMEA traders getting in (€ & £ slammed) Image
3/ CNY (a top down managed FX rate) had been very stable vs USD while ¥ had been melting down (& therefore CNY massively ↑ vs ¥ obviously)

BUT- as ¥ plunge began to (somewhat) stabilize, CNY(&CNH) began to fall sharply - rivaling that of Aug’15 🇨🇳deval move
(USDCNY +1% is huge) Image
Read 6 tweets
Apr 19
WATCH 🇯🇵 AS BOJ GETS TESTED Wed (later, few hours) 10:10am🇯🇵/9:10pm🇺🇸EST for a potential Fixed Rate Op (offer to buy unlimited JGBs & cap yields) Announce
@RealVision
1/
JGB futures are getting crushed right now on volume, implying cash JGB yields > 0.25% YCC upper bound at open
2/
Note, there is a competitive buying op (regular preannounced JGB buying at 10:10am) already scheduled for tomorrow for total ¥1.5tn JGBs from 1y all the way up to 25y tenors

BOJ can:
•Increase amounts of scheduled buys
•Do a fixed rate op on top
•No change (least likely)
3/
¥ futures are moving on/moving to spot USDJPY thru each major handle (& ½ handle)- USDJPY 126, 127, 128, 128.50 etc

Note the volume spikes corresponding w/ short cover moves are larger per clip (as short ¥ is super crowded)- yet once cleared, ¥ continues ↓ to next handle
Read 9 tweets

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