Stock版 - TBonds put JPM under stress |
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N********n
发帖数: 8363 | 1 (ZZ)
JPMorgan is by far the largest derivative player in the world and they are
the largest player in interest rate derivatives. Most of these are in the
field of interest rate swaps.
In simple terms, our hero JPMorgan, on orders from the Fed buys a trillions
of dollars of long bonds in the future and at the same time sells or shorts
trillions of dollars of short term money of say 30 days or 90 days also in
the future. The long bond was purchased at say a yield of3.4% to 4% and the
short term money was shorted at a yield of .05% per annum or roughly par.
The huge purchases of these swaps (buy long term bonds in the future and
short 90 day treasuries in the future) lowers the price of real treasury
bonds as this stimulates the purchase of these bonds at the present time.
This is why the bond vigilantes were nowhere to be seen in the states. It
will also explain why our camp knew it was impossible for interest rates to
rise as this would blow up JPMorgan.
Now we see that the long bond yield is rising which is putting much pressure
as losses mount on JPMorgan. They gain nothing from the short end as they
shorted at 100 cents on the dollar and that is today's price.
The real risk to JPMorgan is the speed of which long bond yields rise as
they cannot get out of their contracts. This will probably be the spark that
ignites inside a coal mine.
A yield of say 5% would create a 1.6% loss of over 640 billion dollars (they
state, I believe, a notional 90 trillion interest rate swaps so 45 trillion
on the long end and 45 trillion on the short end). That would blow up
JPMorgan and create havoc and collateral damage equal to a neutron bomb in
the financial area of Wall Street.
I hope this explains in simple terms how significant this is and I will now
report on this as the bond yields have been rising exponentially these past
few days. |
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