The Son of Finance of the Great Age

  Chapter 158 Shorting Bond Indexes

"Still understand?" Zhong Shi looked at Louis, who was still looking pensive, and continued to explain: "If brokers realize that the money they lend to customers is at risk, then the most likely thing they will do is to ask customers to call for a deposit. The reason is to force their clients to sell their portfolios. Even if the margin is doubled, these hedge funds will have to sell hundreds of millions of dollars in bonds, after all, their positions are there.”

Although the exchange provides customers with 40 times leverage, both brokers and on-site brokers can add another layer of leverage to their customers. For example, a bond futures contract requires a margin of 2,500 US dollars, then the broker People completely require customers to only pay $1,250 or less, and they will make up the rest of the money themselves. After all, they earn commissions. Naturally, they hope that the customers' transactions will be as large as possible.

In this way, the leverage increases to 80 times, and some brokers can even increase the leverage of their clients to 100 times or more, but in this way, part of the risk is transferred to the broker, and these Once the brokers who follow the wind and smell the risk in the market, the first reaction is to write themselves clean and ask their clients to call for margin.

Most of the funds of these customers have been spent and invested in the bond market and the corresponding futures market respectively. In order to maintain a large portion of the bond market’s income, they are bound to do long in the bond futures market. When the demand for margin calls comes to them, they will Sell ​​part of your position to cover margin calls.

"In this way, the selling orders in the market are greater than the buying orders, and bond prices will inevitably fall, and the decline will accelerate the panic of brokers, and they will call for margin again, which will cause hedge funds to sell their portfolios on a large scale again. , It’s a vicious circle!” After realizing it, Louis gasped, somewhat unable to believe Zhong Shi’s conclusion.

   "Yes!" Zhong Shi sighed leisurely: "The worst result of this kind of sell-off is not only in the US market, but also spread to other markets, and even Canada is not immune."

   "Is there no way out? The Fed will watch long-term interest rates rise in a straight line?" Lewis thought for a long time, frowning, and he asked a good question.

"No!" Zhong Shi said firmly: "Don't forget what the original intention of the Fed to raise interest rates is. They can only stick to the current policy for a soft landing of the economy, and may even raise interest rates again because of the rise in long-term interest rates. ! For the sake of the entire economy, the bond market can only be sacrificed, or a few commercial banks must be added.”

  The horror on Louis’s face became a little more serious, and then he reacted, and a look of excitement immediately appeared on his face: “Then can’t we be short…”

  Zhong Shi nodded approvingly, left a sentence "wait for the latest New York Times, Wall Street Journal" and got into the small trading room specially set up for him.

This is a small room less than 20 square meters. There are six computers and twelve phones on the desks. Six traders are sitting in front of the computers nervously staring at the numbers flashing on the screen. They can invest in the accounts of line series companies, but they can't buy and sell at will without the presence of Zhong Shi.

   "What's the current situation of the 30-year Treasury yield?" Zhong Shi couldn't wait to ask as soon as he came in.

"The current quotation is 97-10, with a yield of 6.25. It seems that it will not be greatly affected by the interest rate hike. What should we do?" A 30-year-old young man quickly reported the current quotation, and then asked What to do step by step.

Zhong Shi only remembers that this person is called David, but I don’t know the exact surname. People in Hong Kong generally like to have English names, especially those in the financial industry who claim to be elites. Even internal emails are written in English on weekdays. of.

  At this time, Louis also came in. He was taken aback when he heard this, and then asked, "Do you want to synchronize outside?"

"Synchronize!" Zhong Shi's tone was very firm, and he said beyond doubt: "Short bond futures, short the 10-year ones outside, and short the 10-year and 30-year ones here, this time we must not hold back!" At this time, the trading volume of the 30-year treasury bond futures market is larger than that of the 10-year treasury bond futures market.

The accounts here deal with the funds of the Skyline series of companies, a total of two billion US dollars, including funds in the US and European bond markets. It is reasonable to say that there are only six people to operate. This team is really too small A little bit, but they all use the channels of the floor brokers, and the volume of each transaction is very large, so they are barely busy.

   "Short 1,000 lots of 30-year contracts. The price is based on the current market price. Get ready to start!" Zhong Shi looked at the treasury bond futures quotes on the screen for a while, and then gave the order.

  What he needs to do now is to light a fire in the current sensitive treasury bond futures market, a fire that can start a prairie fire.

After 1,000 empty orders were placed, they were all sold after waiting for a minute. The price of the 30-year contract remained at the 97-10 position without any change. It seems that the bulls are buying at this position .

   "Sell another 2,000 lots!" Seeing that the market's reaction was unsatisfactory, Zhong Shi continued to test.

The price of the 30-year bond futures in February finally changed. Under the pressure of 2,500 consecutive empty orders, it finally changed a price and fell to 97-9. Soon, these sales orders were eaten up again, as if the market There is a force protecting the plate.

   "Buy 1,000 lots at the market price, and fill in part of the previous position." Zhong Shi turned around and went long in the opposite direction. First, he closed the previous short position, and second, he tested the strength of the bulls.

  The 1,000-lot long order was sent to the broker on the floor by phone, and it took three to four minutes to complete the transaction, but at this time the price of the 30-year term was still at 97-9, and there was no sign of rising.

"It seems that the market's expectations for the future are very pessimistic! The bulls are now reluctantly preventing the price from falling, and they are unable to attack!" Zhong Shi sighed, but just after he finished speaking, the quotation appeared in front of the computer screen It pulled out an upward straight line, and the price was raised to 97-12 almost within a few flashes.

  The smallest unit of change in the bond market is 1/32, which is 0.03125 US dollars. Now it has risen suddenly by 3 points, which is displayed on the screen as a long green line, which also means that the yield of long-term government bonds has dropped.

   "What's going on here?" Zhong Shi fell into deep thought for a moment, and the reverse changes in the market made his thinking confused. Has history changed since then?

   No, this is not history changing! Is this a normal price fluctuation, or is it a forced push by the bulls, hoping to change the market's expectations? Zhong Shi thought about it for a long time, and finally decided that it should be the latter. The most likely thing is that the bulls forcefully pull up, and then look forward to the entry of the follower, ship during the pull-up, and then leave all the positions to speculators.

   "Sell 5,000 lots at the market price!" Zhong Shi, who understood, immediately issued a trading order. Such an opportunity must not let the bulls succeed, otherwise they will not be able to catch their main force.

   But what surprised Zhong Shi was that his big deal was taken down by the bulls without any pressure, which made Zhong Shi feel a bit in a dilemma. If the previous judgment is wrong, then he may lose a lot of money. Although the current position is not large, this is not in line with the general environment. After all, the Federal Reserve has announced an interest rate increase.

After thinking about it for a long time, Zhong Shi gritted his teeth and decided to continue shorting to the end: "Open another 5,000 lots and see how much the bulls can take!" He quickly dialed the phone number of the floor broker.

  As expected by Zhong Shi, it took five or six minutes for this transaction to be completely completed. Part of this may be taken by the bulls who first provoked it to follow suit, and more of it was forced by the bulls themselves.

  At this time, the price of the 30-year treasury bond futures has stayed at 97-13 for a while. It seems that the bulls are unable to push up the bond price, and the two sides are stalemate at this point.

Zhong Shi has not yet confirmed who is taking the order just now, and whether the main bulls have the awareness that the yield is about to rise, but the continuous large-scale selling here obviously makes them feel pressure. At present, they are most likely to hope that the bond The price retreated just in time for them to cover their positions at low levels.

   "Sell 5,000 lots at the market price!"

  February bond futures contract was quickly suppressed to the price of 97-9, but the bulls have set up an important defense here, obviously their psychological price is here, indicating that they will not let bond prices continue to fall.

   Soon, under the buy order of the bulls, the bond price rose again to 97-10, and the lot size that appeared in the two columns of buy and sell began to decrease, and the time until the end of the transaction was running out.

   At this time, the price displayed on the screen is 97.3125, which is the same as the opening price all day long, YTM (yield to maturity) is 6.25, BP (basis point) has not changed, the price and YTM are the same as the previous day, and the two sides have a tie.

   "Let's talk about it tomorrow, let's stop here today!" Seeing that the bulls didn't intend to fight again, Zhong Shi rubbed his head, and said somewhat uninterestedly. On this day, a short position of 12,000 lots was established, which is nothing compared to the current market with a daily position of nearly 500,000 lots, but Zhong Shi knew that this situation would not last long.

"We have done about 20,000 lots in the ten-year period. The position has decreased, but we have also made some profits. The fluctuation in the ten-year period is greater than here." Louis, who just finished the transaction, walked in, Glancing at the display on the screen, he said triumphantly.

   "The good show is yet to come!" Zhong Shi curled his lips disapprovingly, thinking that he might have to ask for more leave, otherwise he really wouldn't have time to come here to operate.

   Khan, it turned out that Chapter 73 was not named. Let me tell you here, Chapter 73 is called Chain Reaction

  (end of this chapter)