Reborn in America: Starting as a California Resident

他展开财政部深层文件複印件，"这次30年期国债拍卖发行量高达50亿美元，票面利率锚定在9.125%但允许1/8点浮动。

We will establish a $3 million position in three phases.

"The first tranche of 1.2 million yuan was subscribed to through primary dealers for newly issued bonds."

Henry circled the key clauses in red, "Pay special attention to the details of the sinking fund terms regarding the 1984 put option—when the CPI exceeds 12%, we can request the Treasury to redeem the bonds at 103% of face value."

Lisa, who was in charge of the transaction, immediately entered the data into the TI-59 calculator: if the actual inflation rate reaches 14% in five years, this clause will generate an additional 27% profit to offset the principal loss.

The second phase, worth 1.5 million, will focus on acquiring war bonds issued in 1972.

These Patriot bonds, with 11 years remaining until maturity, are trading at a discount of $91.875, representing a yield to maturity of 10.85%.

He specifically pointed out three special bonds with separable military stock subscription rights—these Cold War-era derivatives can now be used as interest rate hedging tools.

Chief analyst David suddenly realized: "You want to use the delta hedging property of call options to lock in risk when the yield curve rises?"

"That's exactly right."

Henry praised, "The final $3000 million will be used to establish a rolling position, using the coupon payments on the 15th of each month to recycle newly issued 10-year Treasury bonds."

This "ladder strategy" ensured optimized duration allocation before the expected interest rate cut in 1984.

Lisa, who was in charge of executing the transaction, asked, "How should the remaining 700 million be deployed?"

Should all the money be invested in short-term treasury bills?

Henry shook his head in denial: "Short-term market liquidity is nearing its end."

Two hundred million was allocated to participate in the overnight repurchase market, but only short-term notes issued before 1981 were accepted as collateral.

The remaining 500 million will be used to establish a short position in December Treasury bond futures, shorting 5000 lots at the current price of 79.08, with each lot corresponding to two put options.

The meeting room suddenly fell silent.

Everyone was aware of the dangers of this decision—the federal funds rate had climbed to 11.25%, and the yield on the 10-year Treasury note hit a 10-year high of 9.18% on August 13.

If Volcker does announce an aggressive rate hike on Friday, their short positions will face huge losses.

"The current basis value of 30-year Treasury futures is $97."

Chief Risk Officer Mark, wiping away cold sweat, reminded us, "For every 1 basis point fluctuation, our account balance will fluctuate by $48.5."

If the auction on Friday fails to sell...

Henry raised his hand to interrupt: "This is exactly the volatility we want."

Sources indicate that Japanese life insurance companies are quietly reducing their holdings of US Treasury bonds.

He pulled up an internal report from Merrill Lynch, stating, "Nippon Life Insurance alone sold $8 million in government bonds in the past two weeks, which is the fundamental reason why Volcker had to take unconventional measures."

......

Under Henry's precise control, Apollo Capital officially entered the turbulent battlefield of the government bond market with lightning speed.

Ten top traders from the company's elite team filed into the heavily guarded safe house.

To ensure absolute secrecy of this operation, they will be temporarily isolated from the outside world during these tense and crucial days, dedicating themselves fully to this financial game.

The secure room is fully equipped. Although the space is compact, the layout is reasonable and the functional areas are clearly defined. Every detail reflects the rigor and professionalism of a top Wall Street firm.

The custom-made walnut trading tables are arranged in a semi-circle, each equipped with a state-of-the-art Texas Instruments TI-99/4A computer and an oversized Sony Trinitron color monitor, clearly and stably displaying real-time data from major global financial markets.

These computers not only boasted unparalleled computing speeds for their time, but also maintained close connections with major global financial hubs such as the New York Stock Exchange and the London Metal Exchange via dedicated high-speed satellite communication lines. This ensured that traders could obtain the most accurate market information instantly, a critical few seconds faster than their competitors.

On the trading platform, a full range of professional trading tools are available, including sophisticated electronic calculators, dedicated trading telephones with multiple lines, and handwriting tablets with encryption capabilities, making it convenient for traders to record key information and trading instructions.

Surrounding the operating area is a huge electronic display wall, composed of 12 high-end cathode ray tube (CRT) displays from Mitsubishi Corporation, occupying the entire wall.

At this moment, financial data from all over the world is flashing across the screen, and the yield curve of government bonds is like a graceful thread, undulating on the screen, echoing the latest information provided by the Bloomberg terminal.

The lounge area is equally luxurious and comfortable, with six genuine leather sofas handcrafted by top Italian artisans, arranged around a solid marble coffee table.

The sofa is designed according to ergonomic principles, allowing tired traders to fully relax during short breaks.

On the coffee table sits a steaming cup of coffee made from top-quality Brazilian coffee beans, its aroma filling the air.

On the small bar next to it, a wide variety of fine wines are on display, from top red wines from Bordeaux, France to single malt whiskies from the Scottish Highlands, so that the traders can have a drink to relax and unwind after a busy day.

Even though Henry couldn't be at the company all the time, the carefully crafted operational instructions he left behind served as a sophisticated navigation system, guiding the team forward.

The traders communicated frequently with Henry via dedicated telephone lines, strictly following his instructions to manage the massive flow of funds with a margin of up to $10 billion. They cautiously and decisively built positions, aiming directly at the "battlefield" of the Treasury bond market, a place full of opportunities and risks.

"Henry, I think it's time for you guys to renovate an indoor bowling alley."

It doesn't need to be too big; one or two fairways are enough.

That way, when we get tired of snooker, we can play bowling.

The tense and focused atmosphere inside the safe house was broken by Thomas's cynical voice.

"you……"

Looking at Thomas, Henry was speechless for a moment, feeling helpless at his untimely suggestion.

However, Thomas abruptly changed his tone, his playful demeanor vanishing instantly, replaced by a serious and focused expression. He strode to the projection screen, pointing to the fluctuating yield curve: "I must say, your combination of long and short bonds was brilliant!"

As he spoke, he fiddled with his diamond-encrusted cufflinks, analyzing them as if they were his most treasured possessions: "First, we use the military stock subscription rights of Patriot bonds as a shield to cleverly resist potential risks, and then we use a tiered strategy to insure the duration."

This is like a boxer in a ring, precisely controlling the distance to their opponent with jabs while simultaneously anticipating and striking with hooks – a masterful combination of offense and defense!

After hearing his analysis, Catherine in the safe house glanced at him slightly.

She never expected that this seemingly playboy would be able to see through the ingenuity of Henry's plan so accurately.

"What's even more ingenious is this elaborate scheme of getting something for nothing!"

Thomas became more and more excited as he spoke, and couldn't help but slam his hand on the table, making the coffee cup on the table clink. "Using the Japanese sell-off as a pretext, they cleverly forced Volcker to raise interest rates, thereby creating market panic."

Then, by using options to transform volatility into a continuous stream of wealth, this goes beyond ordinary trading; it's practically equipping the government bond market with a steering wheel that can be manipulated at will!

"Hehe, it's not as amazing as you say!"

Henry spoke these words aloud, but inwardly he was filled with emotion;

The most perfect disguise in the world is to make the whole world underestimate one's own sharpness and wisdom;

Thomas, this seemingly absurd playboy, so accurately pointed out his three hidden trump cards amidst his laughter: first, he used special terms to build a solid safety cushion to ensure the safety of the principal;

Then, they amplified market panic through derivatives to find profit opportunities;

Finally, they cleverly exploited information asymmetry to reap the liquidity premium.

Such keen insight is truly remarkable.