Chapter 163 The fierce battle between the United States and Japan

It stands to reason that with the development of the futures market today, the daily liquidation system should be the consensus of all traders, because futures trading adopts margin trading. If there is no daily liquidation, the price rise and fall will accumulate the risk of the losing party. When this risk accumulates When it reaches a certain level, those trading parties who have done wrong direction will face disaster, and even eventually breach of contract.

However, the LME has not adopted such a system, and the LME’s member management is actually limited to clearing members, and basically ignores non-clearing members and customers. However, it has only 14 clearing members, and only these few are clearly satisfied when trading on the floor. Can not meet the needs of the market. In this case, the trading mode between brokerage companies' offices is very popular, and the trading volume of this kind of telephone trading as the main mode accounts for more than 60% of the total trading volume of the entire copper market.

  Strictly speaking, LME is not an exchange in the strict sense. It is a hybrid exchange that mainly focuses on forward transactions and also has centralized trading methods. Since the transactions between the offices of brokerage companies are off-exchange transactions, there are basically no regulatory issues, so the situation of setting up and manipulating here is repeatedly prohibited.

   "Tell me about your transaction?" Zhong Shi said casually while fiddling with the signature pen in his hand. In his impression, Mr. Hammer has already begun to lay out in the copper market. For the Sumitomo consortium, they have a natural advantage in manipulating copper, because Sumitomo Corporation under the Sumitomo consortium is the world's largest copper exporter, and it is in their interest to raise copper export prices.

"Here we are..." Brian briefly introduced the situation of the brokerage company. They are all common situations such as ordinary deposits and trading volume. At the end, he said proudly: "Our trading volume is the largest in the market. Being able to play against our brokerage company is a VAM agreement."

Even if it is an off-exchange agreement, the brokerage company must abide by certain regulations of the exchange. After all, they are relying on this platform, but in private they can use financing means to raise leverage, so Brian said that the largest trading volume is very important. possible.

  Zhong Shi smiled and said: "So, I want to take all the long orders in the market, can I?"

Unconvinced, Brian asked back: "Do you know how many trading orders there are in the market? Not to mention the floor and electronic trading, just talk about the telephone market. The daily trading volume reaches 400,000 lots. Do you know how much capital is needed for this?" Is it?" The security deposit alone requires more than two billion US dollars, and even Mr. Hammer does not have such courage.

  For the current Zhongshi, more than two billion U.S. dollars can barely be scraped together by gritting his teeth, but if this is the case, even the LME, which has always ignored the manipulation of the trading market, cannot condone it.

  Besides, once there is a squeeze, as a copper trader, short sellers can trade copper in cash. Zhongshi may be able to deliver, but why buy such copper?

   "Hehe" Zhong Shi laughed noncommittally twice, then changed the topic, and said a few more gossips, which allowed Brian to buy a long order of 100 lots of copper futures at the market price, and the delivery date was July 31.

  The reason why he didn’t make a big purchase is because Zhong Shi still needs to see the future trend of the copper market. After all, whether the trend will be like that of later generations, Zhong Shi really has no confidence in his heart.

  …

  Back to the U.S. bond market, as the U.S. launched trade sanctions against Japan, the game between the two sides in the financial market has become increasingly fierce.

After experiencing the unprecedented increase in bond market yields on March 2, the entire bond market has shown signs of collapse. On this day, Japanese long-term bonds rose by 17 basis points, which means that the bond price in terms of 100 fell by 1, That's a $1,000 move on a $100,000 bond lot, and a $1 billion position represents a loss of more than $10 million a day.

  With the price cut, the liquidity of the entire bond market has become worse, and this is the most terrible thing.

At this stage, hedge funds are starting to get scared, because they can’t sell their bond portfolios. Facing brokers’ continuous margin calls, they urgently need to sell bond portfolios to meet the margin requirements, so the market mobility is gone.

  What Zhong Shi didn’t know was that on Wall Street, macro hedge funds were all trying to find opponents in the market and seek to sell their bond portfolios.

   "Sell it, sell it all to me!" There are such roars everywhere in the hedge fund's internal trading platform.

   They were greeted with louder growls, with traders shouting back, "I can't sell!"

  …

"Mr. Zhong, I think we can buy long-term U.S. bonds!" By the end of March, the market was full of wailing. Louis, who had been paying attention to the bond markets in Europe and the U.S., finally couldn't stand it any longer and called from Hong Kong. .

On March 22, the Federal Reserve announced another interest rate hike, another 25 basis points, and the short-term interest rate rose from 3.25 to 3.5. The most important thing for the Federal Reserve at present is to curb the inflation of the US economy, and the collapse of the bond market has been ignored. .

  No one can explain the rise in yields in the bond market, not the chairman of the Federal Reserve, the president, not even the hedge fund managers who are fighting on the front line.

The yield on the 30-year bond rose to 6.5 percent and the yield on the 10-year bond rose to 5.5 percent, with yields on the two most traded bonds on the market each up 18 percent in just two months. basis points and 25 basis points, which means that Zhongshi has made a lot of floating profits in these two bond markets.

   "Do you think inflation in the United States has been suppressed?" Zhong Shi asked rhetorically.

"right!"

"Have you noticed? The Japanese government is still insisting on the US national debt. At the same time, due to the rise in the exchange rate in February, a lot of yen capital has been converted into US dollar capital and entered the US market. The reaction of these funds to the market is likely to appear in the economy in April. in the data?"

   "But, what is Japan's capital?"

"Don't underestimate the power of Japanese funds. Maybe they can force the Federal Reserve to further raise interest rates. You must know that the current interest rates in the United States are higher than those in Japan. Except for the Japanese market, due to the increase in the yield of the European bond market The rise has caused a lot of European dollars to flow back to the United States, and you must know that this money is extremely risk-averse."

"what do you mean…"

   "Yes, the Federal Reserve will continue to raise interest rates in the future. Now the collapse of the bond market is far from over!" Zhong Shi explained patiently.

"But..." Louis hesitated for a long time, and finally gritted his teeth and said, "Recently, an opponent wants to sell us a batch of long-term US dollar bonds. The price is very attractive, and the yield has reached 5.6%, which is much higher than the market yield 10 basis points. I think..."

"Oh? There is such a thing?" Zhong Shi was taken aback for a moment, and then realized that due to the deterioration of bond liquidity in Europe, the United States, Canada and other places, some hedge funds targeted Tokyo and Hong Kong as their counterparties. and other financial centers. He thought for a while, and finally said: "Let's forget it, I estimate that the yield of bonds will rise in the future, and they will offer lower prices by then."

   "Okay then!" Louis' voice revealed unwillingness, but he had no choice but to call Zhong Shi the fund manager in charge of the overall situation, even though he disapproved of Zhong Shi's judgment.

  However, the reaction of the market confirmed Zhong Shi's judgment.

   Shortly after the Federal Reserve announced another interest rate increase, Japan once again announced that it would reduce its holdings of U.S. treasury bonds, this time to an amount of 8 billion U.S. dollars. At the same time, the money will not be shipped back to Japan, but will be stored in the U.S. storage system.

   On April 18, the Federal Reserve announced another rate hike, raising the short-term interest rate from 3.5% to 3.75%. At the same time, the Japanese Hosokawa cabinet announced its resignation.

Although the Hosokawa cabinet was tough in the U.S.-Japan negotiations, due to the sluggishness of the Japanese economy and political chaos, he was forced to announce his resignation after less than a year as prime minister. What kind of agreement is unknown to outsiders, but the Japanese side cannot stop the financial war against the United States.

Japanese conglomerates that have reaped huge profits from the U.S. bond futures market have increased their short-selling efforts. This is also due to the U.S. exchange system, because the huge amount of U.S. treasury bonds held by Japan enjoys hedging exemptions. The online account is several times larger than the speculative account, and the profit obtained is also several times that of Zhongshi's current profit.

  On May 17, less than a month after the last rate hike, the Federal Reserve announced another rate hike, this time by a full 50 basis points, making the short-term interest rate rise from 3.75% to 4.25%.

Not long after, the Japanese conglomerate reduced their holdings of U.S. bonds again, which seemed to be a law. Although the U.S. knew that Japan was contributing to the inflation, they had enough reason to reduce their holdings of U.S. bonds when the yields of long-term treasury bonds rose. This also makes the United States suffer and cannot explain.

   On August 15, the Federal Reserve raised interest rates again, another 50 basis point rate hike, and the short-term interest rate rose from 4.25% to 4.75%. At the same time, the United States and Japan started negotiations on trade surplus and deficit again.

   On November 15, the Fed’s interest rate hike reached its peak. This time it increased by 75 basis points, causing the short-term interest rate to jump from 4.75% to 5.50%, while the ten-year long-term interest rate also jumped to 7.5%.

  The tragic interest rate hike has seriously affected the development of the US economy. In terms of foreign exchange, Japan's exchange rate has basically not risen to 100:1 this year, causing Japan to suffer heavy losses in exports.

By the end of 1994, the two sides had fallen into an irreconcilable situation, and the relationship between the two had also fallen to the lowest point in history. From the perspective of the high-level officials of both sides, this situation was undoubtedly a state of killing one thousand enemies and self-defeating eight hundred, but the two sides No one planned to stop, but such a stalemate was broken by an incident at the end of 1994.

   Hastily ended the debt crisis in 1994, and hurriedly kicked out those who were in the Chinese New Year. I was exhausted.

  

  

  (end of this chapter)