Key insights

• 📉 The recent movement of the Yen and its impact on the market, including the attempt of central planners to prop it up
• 💹 Prediction of the Yen's value reaching 200 and its potential implications on treasury yields and global economy
• 💰 Impact of dollar price of oil and Yen exchange rate on Japan's financial system
• 📊 Analysis of recent movements in 10-year treasury yield and dollar Yen exchange rate
• 💱 Japanese banks using diverse funding sources, including swapping Yen for dollars, leading to varying funding costs
• 🔄 Challenges with funding costs due to the inversion of the treasury market and Federal Reserve's benchmarks
• 🔁 Potential self-reinforcing cycle of taking more risk until it all blows up
• 📉 The implications for collateral in the CLO Market could exacerbate the risks for Japanese firms

Q&A

• Where can more information on the topic be found?

  More information on the topic can be accessed at Euro dollar University's YouTube channel and website.

• What risks are Japanese banks facing?

  Japanese banks are at risk due to a combination of factors, including the weakening Yen, potential US recession, implications for collateral in the clo Market, and the potential self-reinforcing spiral of negative consequences. The Bank of Japan's decision to hike rates may contribute to a self-reinforcing doom loop.

• How are Japanese banks dealing with funding challenges?

  Japanese banks are facing challenges with funding costs due to the inversion of the treasury market and the Federal Reserve's benchmarks. They are selling treasuries to buy higher US dollar yielding assets to offset the negative carry, which are riskier. This behavior may lead to a self-reinforcing cycle of taking more risk until it all blows up.

• What are the potential implications of the Yen's movement on the market?

  The potential implications of the Yen's movement on the market include the prediction of the Yen's value reaching 200, its impact on treasury yields and the global economy, and the potential risks for Japanese financial firms.

• What does the video discuss?

  The video discusses the volatility in the treasury market, the skyrocketing yields on the 10-year treasury, the crashing of the Yen against the dollar, and the unsuccessful attempt of Japanese Central planners to stabilize the Yen.

• 00:00 Huge volatility in the treasury market and the yen-dollar exchange rate. Yields on 10-year treasury exploding while the yen is crashing against the dollar. Attempt to stabilize the yen by Japanese Central planners failed. Seeking insights on these market dynamics.
• 05:31 The video discusses the recent movement of the Yen and its impact on the market, including the attempt of central planners to prop it up, the prediction of the Yen's value reaching 200, and its potential implications on treasury yields and global economy.
• 11:50 The discussion covers the potential impact of the dollar price of oil and the Yen exchange rate on Japan's financial system, with a focus on the recent movements in the 10-year treasury yield and the dollar Yen exchange rate.
• 17:19 The Japanese Ministry of Finance and banks may be selling treasuries, impacting the Yen and dollar exchange. The Japanese banks are using diverse funding sources, including swapping Yen for dollars, leading to varying funding costs. The funding cost fluctuates with the FED funds rate.
• 21:32 Japanese banks are facing challenges with funding costs due to the inversion of the treasury market and the Federal Reserve's benchmarks. To offset the negative carry, they are selling treasuries to buy higher US dollar yielding assets, which are riskier. As a result, they are rationalizing buying riskier junk corporates and convincing themselves that there's no added risk. However, this behavior may lead to a self-reinforcing cycle of taking more risk until it all blows up.
• 25:46 The Japanese Banks are at risk due to a combination of factors including the weakening Yen, potential US recession, and the implications for collateral in the clo Market. This could lead to a self-reinforcing spiral of negative consequences