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👇
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👇
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
“…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.”
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)
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)
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↓
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)
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)
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