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  • Japanese Government Bond Market will collapse either in absolute terms or worthless yen.
  • Best way to short Japanese Government bonds are through Tokyo and Singapore listed futures and options.
  • Buying gold in yen may be the best way for retail investors to play this trade.

In this episode of BullsEye Trading, Nicholas Pardini interviews Tres Knippa of Kenai Capital to discuss the case for the trading the short Japanese government bonds, the catalysts for the trade, and the best ways to go about. He also updates viewers on the internals of the gold market.

Topics that are discussed include how Japan has used monetary policy to get away with monetizing debt without panicking bondholders. Then they explain how this is unsustainable and already has resulted in cost push inflation (especially in food and energy), which has more than offset any economic gains from increased exports. Also, Nick and Tres propose what catalyst will ultimately cause JGBs to spiral into a full-blown debt crisis. It only takes the 10-year bond yield to get to 3% to cause a Japanese default on interest payments.

For More Information on Tres and Shorting JGBs:

Source: Video: Interview With Tres Knippa On Japanese Government Bond Market

Additional disclosure: I am long gold futures, not GLD