"This is a good time for Japan to solve deflation, no wonder they dare to do this short Treasury bond futures!" After reading the research report from Hong Kong, Zhong Shi couldn't help but sigh.

Originally, the Japanese stock market collapsed in the 90s, but due to the low interest rate policy maintained to stimulate the economy, there was a flood of liquidity, and to put it bluntly, there was too much money circulating in the market, but due to the economic downturn, this money became a big problem. Therefore, the Bank of Japan began to raise interest rates and recover money from the market, but it was difficult to grasp the strength of it, and it accidentally turned into deflation.

Deflation, and inflation are two concepts, in short, there is less money available for circulation in the market, according to the law of economic development, it is better to have a little inflation, but also to try to avoid deflation, so at this time it is necessary to open the floodgates to release liquidity.

At this time, even if the yield of the Japanese bond market rises due to the chain reaction, as long as the Bank of Japan comes out to say a few words, or makes a reverse operation, such as reverse repo in the bond market, it is easy to dispel the reverse expectations in the market.

"Sure enough, it is a ring with a ring, conforming to the right time, place and people, it seems that there are masters on the Japanese side!" Zhong Shi thought about it from beginning to end and praised it from the bottom of his heart.

What he didn't know was that this was a joint effort by economists and strategists at Japanese brokerages, after two massive crashes of the Nikkei in '90. The Japanese side began to attach importance to the financial war, and the relieved Japanese securities firms began to recruit talent in a big way, and often exchanged views with each other on the international market, especially the US market, but they did not know that all this was for the purpose of fighting an economic war with the United States at some point in the future.

Now that the opportunity has fallen from the sky, the Japanese who have been sharpening their knives for a long time have shown their killer moves!

Sure enough, in the positions announced after the close, Japan's Nomura Securities, Daiwa Securities, Nikko Securities and other large brokerage positions on the bond index short orders have increased significantly, and those brokerage seats controlled by the Japanese consortium have also increased their short positions to varying degrees. At the same time, the long orders of investment banks and brokers in the United States have also increased their holdings significantly.

And another battlefield. i.e. the bond market. There were also varying degrees of price volatility during the session, with the trading volume hitting a new high in the last month. Analysts explain this phenomenon by the fact that the market's current inflation expectations have reached unprecedented levels, coupled with the fact that some financial institutions have had difficulty maintaining their positions due to losses in the yen, so they have sold their bond portfolios to maintain margin. In particular, hedge funds that have placed heavy bets in the yen market in the early stage are the mainstay. Investors should be aware of the current systemic risks. It is recommended to wait and see and enter the market cautiously.

……

On February 21, it was a week after the breakdown of negotiations between the United States and Japan. Conditions continued to deteriorate in the European bond market, with 14 basis points higher than 14 basis points in Germany, 23 basis points in Italy, and 33 basis points in Spain.

"Zhong Sheng, we have made a total profit of nearly 200 million US dollars this week, and the whole of Europe is like crazy, selling bonds everywhere, even if it is a 3A-rated government bond, I don't know what's going on?" In the trading room, the traders who operated at night said to Zhong Shi with a smile on their faces, during this time, they continued to short the bond futures markets of European countries, and the profits they obtained exceeded the principal they invested.

Triple A bonds are the bonds with the highest credit rating, basically no risk of default, investing in this kind of bonds is basically a risk-free investment, but now in the case of good European fundamentals, even the yield of this kind of bonds has begun to soar, so that these veterans who have been immersed in the bond market for many years can not see why.

Zhong Shi smiled, and then said half-jokingly and half-seriously: "If I were you, what would I do after experiencing interest rate hikes and yen losses?" ”

One of the astute traders immediately replied: "Shrink your position in interest rate futures, of course, or simply liquidate all your bond positions." ”

"That's it!" Zhong Shi clapped his hands applauded: "If a fund has a large position in the US bond market and loses a lot this time, then they have to reduce their position in the European bond market, or even withdraw from Europe, which is the reason for the recent reverse plunge in the European bond market." ”

When everyone said this to him, he understood the reason for the recent reverse fluctuations in the European market. Of course, this is only one of the reasons, but more importantly, the entry of Japanese conglomerates has put more pressure on these already panicked hedge funds, which have retreated despite the fact that European interest rates have been cut.

"Continue to short, and at the same time increase positions, at least hold more than 60% of the position, I don't think the broker can say anything, after all, our account is still profitable. By March, I started to reduce my position, and by that time I would re-estimate the situation, how about it, can I do it? Seeing that they understood, Zhong Shi began to lay out the operation strategy again.

“haode！” The traders said yes one after another, and then said goodbye to Zhong Shi and went back to rest, and it has become their practice to stay in the morning to talk to Zhong Shi about the market.

After the traders who handled U.S. bonds went to work, Louis followed Zhong Shi into the conference room, showed Zhong Shi a copy of the Wall Street Journal, and took the opportunity to tell Zhong Shi: "The Japanese side announced that it would reduce its holdings of U.S. Treasury bonds by 5 billion U.S. dollars, and it seems that yields are going to rise again at the beginning of today's session." ”

Five billion dollars? Zhong Shi frowned, compared to the total economic volume of the United States, this amount of money is simply a drop in the bucket, even relative to the entire bond market, it is just a drizzle.

The capital market in the United States is well developed, and in addition to the treasury bond market, there is also a corporate bond market, and the types of bonds alone can be divided into split interest bonds, split principal bonds, anti-split interest bonds, and anti-split principal bonds in the form of interest payment, in addition to a wide variety of derivative instruments, and the treasury bond market alone has hundreds of billions of dollars, not to mention the larger enterprise bond market.

"It seems that the Japanese are also aware of the risks in the bond market, although the scale of the reduction this time is not much, but it may be a signal that there is a possibility of reducing the holdings in the future." Louis babbled for a long time, and Zuihou came to a conclusion.

"You're right, but you're not entirely right." Zhong Shi nodded, and then continued with his words: "Have you ever wondered where the money will go after the Japanese sell this bond? ”

"Convert it to yen...... Wrong! "Louis blurted out, but immediately realized that something was wrong, and now the exchange rate of the yen against the dollar is at an all-time high, and if this money is converted into yen at this time, no fool will be willing." Since you don't even want to risk bonds, you can only keep them in the bank and eat interest! ”

"Not bad!" Zhongshi gave a thumbs up to Louis, "Recently, there has been a clear trend of inflation in the United States, which is why the Federal Reserve announced interest rate hikes. Although short-term interest rates cannot be compared with long-term interest rates, they are safe and risk-free, which is the first priority of foreign exchange management. But have you ever thought that this money, amplified by the multiplier effect, has increased liquidity in the market, and has not yet increased inflation expectations for the US economy? ”

The so-called multiplier effect refers to the effect that is amplified by the continuous storage of money in the circulation system. For example, under the premise of a reserve ratio of 10%, 100 yuan is deposited into a bank, and the bank lends 90 yuan after paying a deposit of 10 yuan, and then the 90 yuan is circulated to the bank, and after paying the 9 yuan deposit, it is circulated again...... So repeatedly, and finally formed a liquidity of 1,000 yuan in the market.

Louis was shocked and realized the danger of Japan's sale of government bonds, and he couldn't help but worry: "If this is the case, then in the future, the yield in the bond market will rise, the price of bonds will fall, and these people will sell bonds and cause more and more money in the market, won't the Fed's interest rate hike be in vain?" ”

"No!" Zhong Shi said categorically: "If this is the case, then don't mention the macroeconomic regulation and control of the economy, you must know that the Federal Reserve has hundreds of means to solve this kind of problem." Interest rate hikes are the most gentle means, not to mention that raising the reserve margin ratio by one point can bring back hundreds of billions of dollars from the market, which is enough to offset the losses caused by this multiplier effect. ”

After a pause, Zhong Shi continued: "Of course, the reserve requirement ratio has too much impact, and the Fed will not use it easily under normal circumstances, and the final situation is to solve this problem by continuously raising interest rates." As long as they carry out reverse repo in the bond market, they can withdraw billions or tens of billions of dollars, which is enough to offset the impact of Japan's sell-off of government bonds. ”

"Why if Japan continues to reduce its holdings of U.S. Treasury bonds!" Louis asked.

"Don't you forget, the Japanese weishenme will hold so much U.S. Treasury bonds? If the trade deficit between the United States and Japan does not change, Japan will have to hold so many US Treasury bonds, otherwise the yen will appreciate sharply. In fact, the ultimate goal is to allow American auto parts to enter the Japanese auto industry, and at the same time open up other markets. Zhong Shi sneered repeatedly, nakedly exposing the process and ultimate goal of the game between the two sides.

"Then let's ......"

"Of course, it's an increase in shorting, we have nothing to fear, and the Japanese are ahead!" Zhong Shi touched his chin and said proudly. (To be continued......)