Hedge funds offer sky-high salaries to "snatch talents", will there be a big market for yen interest rate trading?

In the talent war in the field of Japanese yen exchange rate, banks and hedge funds are aggressively recruiting experienced traders after widespread losses caused by the largest market volatility in many years. Some market participants are offering multimillion-dollar salary packages to attract experienced yen rate traders, following the sudden sell-off triggered by Trump pushing Japanese bond yields to their highest level in 20 years. This new round of recruitment is based on the recruiting frenzy that began before the central bank began raising interest rates last year. In recent weeks, there has been rapid movement of personnel in industry companies. Harimoto from BlueCrest Capital Management will join Modular Asset Management as a portfolio manager to help expand its business in Japan. Ron Choy also jumped from BlueCrest to Balyasny Asset Management in Chicago, where he received a salary package of about $30 million. Capula Investment Management and Dymon Asia Capital have poached experienced derivative traders from Deutsche Bank and Barclays Bank, respectively. Yoshiki Kumazawa, director at headhunting firm Morgan McKinley, said, "Hedge funds are still eager to hire yen rate traders. For traders with a good track record, supply cannot keep up with demand." More initiatives may be in the works: In the recent moves, Capula Investment hired Masahiko Maihara from Deutsche Bank, while Dymon Asia Capital in Singapore hired Shumei Kameyama from Barclays. Both companies have years of experience in trading derivative contracts related to the yen exchange rate. Banks are also looking for talent. Marcus Yuki Sato moved from Deutsche Bank to the Tokyo office of Barclays in March this year, responsible for selling yen rate products to hedge funds and other international clients. In January, the British bank recruited senior yen rate trader Yoichi Takemura from the US hedge fund company Garda Capital Partners LP. Bank of America hired Shuya Sakamoto, former head of yen swap trading at Barclays, for a senior position in its Japanese securities division. The demand for talent is so high that some hedge funds are willing to give a second chance to traders who were unemployed during the turmoil in August. Yosuke Motegi recently joined Polymer Capital Management in Hong Kong as a portfolio manager, reuniting with his mentor Chiga Murayama from BlueCrest. Both left Michael Platt's private investment company after the turmoil in August last year. After the biggest market volatility in years in the Japanese yen exchange rate market, the demand for skilled traders has increased. By mid-March, market participants generally bet that as the Bank of Japan continues to raise interest rates, the yield curve will flatten. After the US introduced so-called retaliatory tariffs and investors speculated that the Japanese authorities would announce an additional budget to mitigate the impact of tariffs, the yield curve suddenly steepened, causing most of these bonds to suffer losses. Traders are concerned that additional government spending may further burden Japan's already heavy debt load. By mid-April, investors were demanding a widening spread between Japanese 30-year government bonds and 5-year government bonds to the highest level since May 2002. A trader at a buying company described the chaos and panic in the trading floor, saying that last month the Japanese government bond yield curve continued to steepen, the trend was very scary, market participants were forced to reduce risk, exacerbating the price decline. The huge price fluctuations led to some companies resigning, including ExodusPoint Capital Management in New York. This is the second major test for the Bank of Japan since it began raising interest rates last year. In August, the yen spread trade was closed rapidly, causing a shockwave in the global market. There is reason to believe that there may be more turmoil in the future. First, it is unclear how Trump's tariff policy will evolve, and these risks may trigger further volatility. In addition, capital moving from the US may lead to more funds flowing to the Japanese coast, which will help stimulate trading activity. Jimmy Lim, Chief Investment Officer of Modular Asset Management, said, "As an Asia specialist, Japan is a core market. Trading opportunities will continue to increase." He added that factors such as rising inflation, possible interest rate hikes by the Bank of Japan, and geopolitical dynamics are driving factors. Higher long-term bond yields will prompt Japanese participantssuch as life insurance companies, pension funds, and regional banksto consider investing in domestic bonds rather than US bonds. The financing needs of fiscal and defense spending are also increasing. Lim said that both will make relative value trading more profitable, and added that Modular will continue to expand its business in Japan when the right talent is available. Relative value trading may include bets on the shape of the yield curve, basis trading that pairs cash bonds with futures bets, and positions aimed at profiting from currency, interest rate, and stock market volatility. Kumazawa of Morgan McKinley said the market is "highly volatile, with a stark divide between winners and losers." However, "there are no signs that investment interest is waning."