tag:blogger.com,1999:blog-8554347448299984407.post8125468713021399634..comments2023-05-13T09:43:33.746+01:00Comments on Macronomics: Macro and Credit - The Pollyanna principleAnonymoushttp://www.blogger.com/profile/16670415818064368635noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-8554347448299984407.post-59642974229646928862016-04-04T11:35:45.705+01:002016-04-04T11:35:45.705+01:00From BAML - Liquid Insight - 18th November 2015:
&...From BAML - Liquid Insight - 18th November 2015:<br />"Buying 2y JGBs asset swapped to dollars: 2y UST +77bp (current: 2y UST+79) or Libor + 70bp (current: L+71bp)<br />The recent moves in the yen basis swap market have been stark and now present an attractive opportunity for dollar investors to create synthetic floating rate or fixed rate USD assets. Using the long route, this would involve (1) buying 2y JGBs; (2) asset swapping them into semi-annual Yen floaters; (3) using a 3s/6s basis swap to convert semi-annual cash flows to quarterly; (4) entering a cross currency basis swap to convert payments to a USD floater; and (5) this could be left as is for a floating asset, or, a receive fixed in US swaps against this would convert it into a fixed-rate US asset.<br />An alternative would be a fixed-for fixed cross currency basis swap that collapses the above five transactions into one trade." - source BAML<br /><br />Easy as 1,2,3...<br /><br />Best,<br /><br />MartinAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8554347448299984407.post-34147468448440307732016-04-03T15:02:11.947+01:002016-04-03T15:02:11.947+01:00Very interesting piece. I would be interested to k...Very interesting piece. I would be interested to know the exact mechanism by which foreign investors can earn "a 100bp spread by swapping dollars into yen to take advantage of negative JGB yields", thus boosting foreign holdings of JGBs. Intuitively, this does not make sense to me. This would also presumably be Yen-bullish? Anonhttps://www.blogger.com/profile/03389851401712556030noreply@blogger.com