The Macro Trading Floor Japanese Macro Tails
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Jan 16, 2026 Alf and Brent delve into Japan's macro landscape, questioning whether the Ministry of Finance is poised to intervene in the yen's fluctuations. They discuss the implications of low bond volatility on risk assets and how gradual yield movements can bolster equities. The duo debates the Bank of Japan's potential tightening and its effects on the yen and bond stability. As they explore trading strategies, they emphasize the importance of front-end JGB rates and the ongoing metals rally as a key market focus.
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Bond Volatility Anchors Market Risk Appetite
- Low bond-market volatility stabilizes credit and equity multiples by encouraging vol sellers to harvest the premium.
- That plumbing effect underpins the broader risk-on backdrop even when yields drift higher gradually.
Buy Rising Vol, Not The Absolute Low
- Avoid buying volatility at absolute lows; prefer to buy when vol is rising but still low to catch regime shifts.
- Sell volatility when it is high and falling, not simply because levels look expensive.
MOF Uses Speed, Level And Fundamentals
- The Ministry of Finance times FX intervention by speed of move, level and divergence from fundamentals.
- Heavy rhetoric now raises tactical intervention probability between current levels and ~161 USD/JPY.
