From the joint intervention of the United States, Japan, and South Korea in the exchange rate to the refinancing plan of the Ministry of Finance, where is the weakness of Beisen Te? 1. In late July and early August, the United States and Japan jointly conducted foreign exchange intervention to support the yen exchange rate. This is the first time since 1998 that the United States has directly participated in supporting the yen. Besent also specifically pointed out the FIMA Repo Facility (which allows foreign official institutions to temporarily exchange US dollars with the Federal Reserve using US bonds as collateral, without having to sell US bonds in the open market). The purpose of expanding it is precisely to enable Japan and other countries to "borrow US dollars to buy Japanese yen" and avoid large-scale selling of US bonds as much as possible, thereby reducing the impact on the US bond market. Japan is an important holder of US Treasury bonds, and selling them will further push up US Treasury yields. 2. Subtle changes in wording of quarterly treasury bond bond auction guidelines In the quarterly refinancing announcement last week, the Ministry of Finance changed the previous expression of "possible future increase in issuance" to "possible future change". The market interpretation is that it has opened the door to reducing the issuance scale of long-term bonds, especially 30-year bonds. Reducing supply helps boost prices and lower yields. Why is the market so sensitive to a single word? The trading of bond prices is not based on the existing issuance volume, but on the probability distribution of future supply. Previously, the market was concerned about only one direction, the continuously expanding supply of bonds. Last week's new wording turned supply risk into a two-way street In the future, the auction scale may increase, maintain, reduce, or reschedule. The market is beginning to consider a scenario that has not been officially recognized before: "If long-term demand deteriorates, auctions remain weak, or 30-year yields rise too quickly, the Ministry of Finance may reduce long-term increments or even target a specific deadline. Even if the probability of this scenario is only 20%, it will still change: the implied distribution of long bond options, the risk return ratio of short selling the long end, and the term premium of 20 and 30 years. The market is actually starting to price a weak version, soft Bessent supply put。 3. Publicly defending Walsh's communication strategy, Besent supported Walsh through television interviews and social media. He stated that the market needs to "detoxify" from the frequent forward guidance of the Federal Reserve in the past, and supports Walsh's approach of allowing the market to price more based on data and inflation itself. Previously, Walsh's statement directly led to a sharp increase in returns. Combining these actions, Besent is still concerned about the non-linear jump in long-term returns due to forced selling, duration supply imbalance, decreased market capacity, and communication errors. Last May, here is https://(x.com)/qinbafrank/status/19258712119296629? S=46&t=k6rimWSEbo2D2TXolYcM-A also mentioned that 4.6% is the threshold for the 10-year US Treasury yield, and the higher the yield, the greater the market pressure. This time, the 10-year US Treasury yield has exceeded 4.6%, and it has already risen to 4.7%, indicating that Besant cannot sit still. Start selling and stabilize bond market expectations to release signals The earlier intervention by the Ministry of Finance to stabilize the bond market was in mid to late October 2023 https://((x.com))/qinbafrank/status/1716746079528481236? S=46&t=k6rimWSEbo2D2TXolYcM-A has also talked about Yellen proposing a repurchase plan, Powell hinting at the expectation of interest rate cuts, and what left a deeper impression was Bill Ackermann being moved out and publicly announcing on October 24, 2023 that he had liquidated his short position in long-term US bonds, after which US bond yields turned downwards. Beisen hopes to prevent further loss of control over long-term yields, with the core reason being that US bond yields not only affect fiscal financing costs, but also transmit to housing loans, corporate bonds, stock valuations, and AI capital expenditures. The higher the yield of long-term bonds, the greater the market pressure, not to mention the pressure on the stock market and housing market. When discussing the US, Japan, and South Korea's intervention in exchange rates last week, it was also said that this was a clear signal from the government to "protect the stability of US bonds", which could lead to a temporary peak in US long-term bond yields. See if that's the case? This article is sponsored by @ bitget_zh, titled 'Bitget Buying US Stocks: Instant Entry, Smooth Trading'