The Bank of Japan is the easiest bank in the world. Big money borrows in yen and then buys assets that are denominated in euros and dollars. Many people attribute the rise in stocks and European bonds (Italy, Spain) thanks to the yen carry trade. However, as of late, the yen has seen material upside and is in fact in an up channel.
Should the yen continue higher, the carry trade will unravel. The canary in the coal mine is FXY, then Italian and Spanish yields.
It’s worth noting the carnage in US REITs, perhaps a direct beneficiary of this yen carry trade. Although the REITs appear to be oversold here, things could get crazy if their shareholders are yen whores.
TLT is lower again, based off the jobs report. Normally I’d say this means stocks are more attractive than bonds. But we don’t want yields to shoot higher too fast. It’s not good for anyone. Having said that, TLT is an interesting long trade here, as it represents stability. If you believe in stability, TLT will bounce here, alleviating higher interest rate concerns. It’s worth mentioning, TLT pays dividends on a monthly basis.
As for gold and silver: they lose in almost every scenario short of a plunge in the dollar.
In short, the yen is the key to almost everything.
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A little gamble with DUST?
“As for gold and silver: they lose in almost every scenario short of a plunge in the dollar.
In short, the yen is the key to almost everything.”
I’ve been thinking the same thing, Mr. Fly. Good call 🙂
I don’t think though that Abe/BOJ will relax their resolve on the QE.
Japan is heading to a much higher inflation rate and that’s it. Even if bonds take a kicking it will be the long end that gets hurt and will mean the BOJ will have to finance in the short end. Either way, long Japanese bonds will take a kicking.
I agree
start of next leg up for a new high OR one more down move?
qrtr end window dressing tells me we’ve started the next leg up for the new high
I plan on putting the bear suit on after July 4th..I think the ‘real corrction’ comes july to sept imho
why would you want to buy treasury here, when yields are still at an all time low. even yields at a 3.50 or 4% on a long bond is not that high. While it will stop refi’s , it might loosen up leading and bring in first time buyers.
One thing to keep in mind… always in mind about the Yen.. is this.
Is Abe/BOJ going to stop the QE before their objective is reached. Will they get cold feet. The right answer will earn millions.
I think they aren’t going to change one iota and the Yen is heading to 125.
I agree. Nice to hear from you, Mr.J.
Utilities….pick one,,,or XLU flying
wetf rocket ship