The yen is strengthening - 117.50 against the USD as I write these lines - so once again the topic of this second posting for the day is going to be the size of the yen carry trade (see below for a separate post on bygone banking).
I looked up again the BIS data on derivatives and realized that, on top of FX forward swap data, they also provide data on plain currency swaps. Both of those types of off-balance sheet derivatives are in essence carry trades in and of themselves, or can be used as vehicles for such. Either way, they are good indicators of the yen carry trade trends.
The chart below is the amount outstanding of all such yen swaps going back to June 1998, up to June 2006 (latest available). Amounts are net i.e. there is no double counting between counter-parties. I add that these instruments are not like options or futures: real money changes hands in the amounts indicated and real money flows must also take place on the forward date. I stress - yet again - that you will not find these amounts on the banks' balance sheets; they are carried as "off balance sheet" items.
I looked up again the BIS data on derivatives and realized that, on top of FX forward swap data, they also provide data on plain currency swaps. Both of those types of off-balance sheet derivatives are in essence carry trades in and of themselves, or can be used as vehicles for such. Either way, they are good indicators of the yen carry trade trends.
The chart below is the amount outstanding of all such yen swaps going back to June 1998, up to June 2006 (latest available). Amounts are net i.e. there is no double counting between counter-parties. I add that these instruments are not like options or futures: real money changes hands in the amounts indicated and real money flows must also take place on the forward date. I stress - yet again - that you will not find these amounts on the banks' balance sheets; they are carried as "off balance sheet" items.
Source: Bank for International SettlementsNear six trillion dollars is A LOT of yen to be out there in swap-land.
I just want to thank you for blogging your analyses and comments. I have for some time enjoyed your comments on the RGE blog -- especially those back-and-forths with moldbug and cassandra -- and am happy to find another forum where you all might air your thoughts. Given the events of the last week, most of your readers are probably busy researching ... for those of us who don't/can't do our own research, thank you very much for continuing to publish yours.
ReplyDeleteDear affirmed,
ReplyDeleteThank you very much for your kind comments. I started this blog mostly as a journal to consistently keep track of current events and my thoughts about them. If others find them interesting, I am really flattered.