2026 Lunatic Fringe - Market and Trade Chat

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Some bonds can lose value based on current interest rates if not held to maturity. USTs are Tier 1 same as cash, but TRADE at a discount or premium depending on economic conditions.
 
All bonds trade, prices go up inversely with the yields. You can however, just hold most to maturity and they pay you the principal back. Which differs from stocks of course.

My coworker does some loan underwriting and had him try to price a 30-year with a good credit score. Nearly 7.5% today
 
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6.5% Navy Federal
 
Off the cuff, I think the US is buying YEN to help Japan stay afloat.

Nations do buy each others debt.
 
The sensible voice in the room.


According to their theory, Washington feared that a collapsing yen would force Japan to liquidate its massive holdings of U.S. Treasury securities to defend its currency.

That narrative falls apart once you understand who actually owns those Treasuries.

The majority of the US debt holdings are not owned by the Japanese government. They are held by Japanese corporations and private institutions that use U.S. Treasuries as a hedge against the fiscal recklessness of their own government.

Also, a sharply weaker yen gives Japan a significant competitive advantage by making its exports cheaper, widening the U.S. trade deficit, and allowing Japanese manufacturers to undercut American producers.
 

My wife left me today. She said it was because I “never stop talking.” I said the yen carry trade is a $20 trillion leveraged bet that the Bank of Japan will never normalize rates and she said “I’m taking the dog.”

Let me explain to you what I was trying to explain to her.

For thirty years Japan ran rates at zero. Zero. Free money. So the entire planet borrowed yen for nothing and bought literally anything with yield. Treasuries, Mexican peso bonds, Nasdaq, your uncle’s crypto. That’s the carry trade. It’s not a strategy. It’s a short volatility position wearing a business casual outfit.

Then in August 2024 the BOJ raised rates 15 basis points. FIFTEEN. And the yen ripped, the Nikkei fell 12% in a day, and the VIX printed 65. That was the tremor. That was the trailer.

She said “you said this last year.” I said YES AND I WAS RIGHT, THE MARKET JUST FORGOT, and she started packing.

Japan’s debt-to-GDP is roughly 250%. The BOJ owns over half the JGB market. They are the market. There’s no price discovery, there’s a guy in Tokyo with a printer and a dream. Every basis point higher on the long end costs them real money on debt they can never actually repay in real terms. So what do you do when you can’t default and you can’t pay? You inflate. You always inflate. It’s the only tool that doesn’t require anyone to vote.

She said “our marriage counselor thinks you have anxiety.” I said your marriage counselor doesn’t know what the 30-year JGB is doing and she said “NOBODY KNOWS WHAT THE 30-YEAR JGB IS DOING, THAT’S THE POINT, PAUL.”

My name isn’t Paul. That’s how far gone we are.

Anyway I’ve got canned goods, a Kagoshima yield curve chart laminated above the bed, and nobody left to explain it to. So it’s you now. Buckle up.
 
Looks like they are trying to trap PM shorts this week in a whipsaw.
 
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