Arthur Hayes: The Bank of Japan may sell 450 billion US debt, which will promote a new round of crypto bull market

Arthur Hayes, founder of cryptocurrency derivatives exchange BitMEX, published a latest article today (21st), pointing out that the Bank of Japan suffered losses due to the U.S. Federal Reserve (Fed)’s interest rate hike policy and had to sell U.S. debt. The U.S. government may print money again in order to absorb the supply of U.S. debt, which will boost a new round of cryptocurrency bull market.

The Bank of Japan may sell US$450 billion in U.S. Treasuries

Arthur Hayes explained that the Bank of Japan had previously purchased U.S. Treasury bonds through a dollar-yen carry trade (carry trade) to obtain higher yields. However, when high inflation occurs in the United States, the Fed responds by raising interest rates as quickly as possible, causing banks holding U.S. Treasury bonds to suffer losses. In March last year, U.S. banks went bankrupt one after another, and the Fed provided extensive rescue measures.

Note: The dollar-yen carry trade (dollar-yencarrytrade) is a strategy based on lending and currency arbitrage. In this transaction, investors borrow in low-interest-rate currencies (such as the Japanese yen) and transfer funds to high-yield currencies (such as the U.S. dollar) to obtain interest rate differentials. Through this strategy, Japanese banks borrow dollars from the United States and invest in high-yield products such as U.S. Treasury bonds.

Due to the long-term high interest rates in the United States and Europe, resulting in huge bond losses, and the fact that the Federal Reserve has no immediate plans to cut interest rates, Japan's fifth largest bank Norinski Bank announced on the 18th that it planned to sell US$63 billion worth of US and European bonds in order to Cover huge unrealized losses. Arthur Hayes believes that this may lead other Japanese banks to follow suit and sell up to $450 billion in U.S. debt, which will have an impact on global financial markets.

The article quotes data and points out: According to the International Monetary Fund (IMF), by 2022, Japanese commercial banks will hold approximately US$850 billion in foreign bonds, including nearly US$450 billion in US bonds and approximately US$75 billion in French bonds. bonds, far exceeding its holdings of bonds from other major euro zone countries.

U.S. dollar liquidity may increase, boosting the rise of cryptocurrencies

Arthur Hayes believes that U.S. Treasury Secretary Janet Yellen will not let a large amount of U.S. debt be sold on the open market and cause bond yields to surge. She will ask the Bank of Japan (BOJ) to absorb the selling of these bonds through the Foreign and International Monetary Authorities (FIMA) repurchase agreement. The agreement allows the central bank to pledge U.S. Treasury securities to obtain U.S. dollar liquidity.

Arthur Hayes pointed out that in an election year, the last thing the ruling Democratic Party needs is a sharp rise in U.S. bond yields, because this will affect the main economic concerns of the median voter, such as mortgage rates, credit card rates, and car loan rates. . If Treasury yields rise, these rates will rise. Therefore, he firmly believes that Yellen will ask the Bank of Japan to use the FIMA repurchase agreement to absorb the supply of US debt.

Arthur Hayes finally pointed out that if the FIMA repurchase agreement increases, it means that the US dollar liquidity in the global currency market increases, which will have a positive impact on the Bitcoin and cryptocurrency markets. He called on investors to buy cryptocurrencies at the lows to take advantage of opportunities arising from increased U.S. dollar supply.

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