Kyle Bass gets it wrong on Japanese bonds

This is a good interview with Kyle Bass because it cuts to the heart of the matter. If you are a partisan in the Bass debate on Japan, you can see him as being either correct or incorrect. Now, I have covered this before and I have stressed that he is looking to make an asymmetric bet on outlier events to hedge his market-long portfolio. He is not taking a flyer via outsized risk exposure to short JGB trades. And Bass does make this clear in his commentary. Nonetheless, his macro view of the way interest-rate targeting central banks operate in a fiat currency system is completely wrong. 
The Japanese situation is all about policy rates, expected future policy rates, expected inflation and currency depreciation. It's not about bond vigilantes forcing a sovereign currency issuer to pay exto...


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