Bank of Japan Gives Up — And U.S. Banks Are Between A Rock And A Hard Place — Don’s Daily Brief

by | Dec 20, 2022

The Bank of Japan gave up (somewhat) on their yield curve control.

They decided to allow the 10 year Japanese Government Bonds (equivalent to their treasuries) to go from 25 basis points to 50 basis points.

This has MASSIVE implications, because there’s a lot of leveraged finance and positions that are based on very cheap Yen. And now it’s gotten twice as expensive.

It may not sound like a big move, but it is. And you’re going to see a lot of selling in other assets as they cover their positions that are now too expensive to finance. Margin calls and panic selling are going to take a while to work their way through the system.

Meanwhile, our banking system in the U.S. is absolutely dependent on a positively-sloped yield curve. One where longer interest rates are higher, so thank banks can borrow money short term, lend it long term and make money.

That is now under pressure — I’ve talked about it before. This will create a lot of motivation to sell bank stocks.

► So for today’s FREE pick, I want you to short Signature Bank (SBNY).

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