Seo Seong Securities, Seo Minjae (2)
America’s debt-to-GDP ratio had surpassed one hundred percent.
It was the first time in history.
If the matter was not resolved within a month, the country would fall into default.
That, too, would be the first time in history.
Resolution required Congress to raise the debt ceiling, yet bitter deadlock between Democrats and Republicans had frozen budget negotiations solid.
So S&P stepped forward.
“We are placing the United States on ‘negative watch’!”
It was the usual preliminary step before a credit-rating downgrade.
And of course, this too was a first in history.
The news Lee Jaseung had foretold slammed into the entire world.
Seo Minjae turned to him with genuine seriousness.
“Do you happen to have connections at S&P?”
“Do you think I would?”
A warning and an actual downgrade were, of course, two different things. They might issue the warning and never follow through.
Yet one thought kept circling inside Seo Minjae’s head.
Lee Jaseung knew the warning would come.
If he had predicted the warning with such precision, the odds of an actual downgrade had to be high as well. The warning alone was already making the markets lurch with anxiety.
And if the real downgrade arrived?
Treasury prices will surge.
Only then did Seo Minjae grasp what kind of gamble their first deal truly was. Strangely enough, it still looked manageable. He began drafting a concrete investment strategy.
“How much capital?”
“Twenty billion won.”
Seo Minjae lifted his head with a puzzled look.
“…Your family office AUM is only fifteen billion.”
“Collateralize loans and bring it up to twenty billion. Leverage ratio of three times.”
“….”
Going all-in on the very first investment and even borrowing on top of it… At least the leverage itself was relatively conservative; that was the sole consolation.
“Excluding margin, the actual exposure will be fifty billion. Entry timing?”
Lee Jaseung set a binder on the desk.
US Credit Rating Downgrade Investment Strategy
“What’s this?”
“I haven’t exactly been sitting idle either. Use this for the detailed strategy.”
While Seo Minjae had been supporting the family office’s early operations, Lee Jaseung had been preparing in his own fashion—crossing into the future every Friday, observing the market’s reaction, then returning to refine the plan.
Lee Jaseung asked,
“If the U.S. credit rating is downgraded, how will the market react?”
“It’ll panic. Panic selling will pour out.”
Later people would cry, “U.S. Treasuries were the safer bet after all!” and the bonds would reclaim their status as the ultimate safe haven. But in the exact moment of impact, the market would act on pure instinct.
“Heavy selling will slam into U.S. Treasuries. Execute the buy the instant the downgrade is announced.”
“Understood. Fifty billion is a relatively light size, so we can get into the position right away. I’ll buy the absolute bottom.”
Seo Minjae read the strategy document with care, adding notes wherever needed.
Insanely meticulous.
Product selection, complementary option overlays, scenario-based risk management—everything was detailed enough to execute in live markets immediately. Checking the key points, he flipped to the final page and tilted his head.
“There’s no exit strategy?”
“Ah. That.”
He had confirmed the figure only a few days earlier and simply forgotten to write it into the binder.
“When the ten-year Treasury yield hits 1.8 percent.”
“Got it. Ten-year at 1.8… 1.8 percent???”
Seo Minjae jerked his head up in shock.
“You know where the ten-year is trading right now, don’t you?”
“Around three percent?”
“Exactly. One-point-eight means the yield is cut in half.”
A drop of 1.2 percentage points. On paper it looked modest; in the Treasury market it was an earthquake. Yet to Lee Jaseung it was nothing remarkable.
“The moment you put the trade on is the exact moment the U.S. credit rating is downgraded. If the downgrade never happens, the trade never happens either. That is a safety valve.”
“But once the downgrade does hit, it will bring an earthquake with it. The entire world will scramble to buy U.S. Treasuries. How much do you think that moves?”
“At least hundreds of trillions of won.”
“If hundreds of trillions pile onto the buy side, a move of this size is only natural.”
“….”
1.8 percent. Seo Minjae stopped writing the note into the blank space.
U.S. Treasury yields cut in half?
It made no sense… yet the longer he listened, the more plausible it sounded. The magic by which the most absurd thing in the world becomes the most obvious.
Seo Minjae tried one last probe.
“…It has to hit 1.8 percent. No exceptions?”
A curt nod.
At that infuriating little chin gesture Seo Minjae sighed and wrote the final note on the last page.
Liquidate at 1.8 percent.
No compromise.
How the hell did I ever get tangled up with this guy?
“You’re genuinely insane.”
“I know.”
“….”
Their contract was simple.
Seo Minjae would support the investments.
Lee Jaseung would support the succession.
Seo Minjae had already performed his role faithfully; now it was Lee Jaseung’s turn to discharge his obligation.
“First, go around making a loud noise about landing the first deal. And while you’re at it, casually drop the U.S. credit-rating-downgrade angle.”
Seo Minjae looked startled. After all, it was the client himself asking him to leak the investment details.
“…Is that actually okay?”
“You have to.”
“What do you mean?”
“Seo Minjae. A U.S. credit-rating downgrade and Yuseong Group corporate bonds turning distressed are not separate events. Think. Once the U.S. rating is cut, how does the corporate-bond market react?”
A U.S. downgrade would send out a massive shockwave. Flight-to-safety would hit, equities would crash, and the bond market—
“Investors will naturally clean out risk assets. The first thing they sell is…”
“Yuseong Group corporate bonds.”
Exactly what would happen in the future. Investors would stampede into safe assets to cut risk; risk assets would be dumped one after another. The direct hit would land on Yuseong Group’s corporate bonds. Under ordinary conditions the distress would stay hidden. But once the tide went out, every weakness would be exposed at once.
“They’ll turn into distressed paper in an instant.”
Seo Minjae’s Adam’s apple bobbed hard. Their contract was never a simple exchange of services. Lee Jaseung’s investment and Seo Minjae’s succession were locked together. Only if he trusted the investment strategy would Seo Minjae’s own card stay alive.
“Who led the Yuseong corporate-bond investment?”
“Seo Minju.”
“And you?”
“My name’s on it too. I was sitting on the investment review committee at the time.”
Just as Lee Jaseung had confirmed from the future. Once Yuseong Group bonds were ruled distressed, someone would have to take the blame. That someone…
High probability it will be Seo Minjae.
Seo Minju would try to pin everything on him. The fact that his name was already on the deal would only make it easier.
“You’re already involved; that can’t be undone. So you go first—spread the word all over the place that Yuseong Group corporate bonds are dangerous.”
“Openly cut my losses?”
“And one more thing. When you warn that those bonds are risky, how will Seo Minju react?”
“Defensively. It will look like an attack on her performance, so she might even start defending them.”
“Exactly. Take the opposite position to hers. A clear contrast will form in everyone’s mind: Seo Minju defended the distressed bonds, whereas…”
Lee Jaseung met Seo Minjae’s eyes.
“Seo Minjae warned about them.”
Goosebumps rose. Seo Minjae finally understood what the consulting he had received actually meant.
“Then when it all blows up later, I can walk away clean.”
“Of course. Every single employee will think it’s unfair to hold you responsible.”
“Wow…”
He let out a long breath that mixed relief and awe.
What the hell would I have done if I hadn’t gotten Lee Jaseung’s consulting?
“Thanks.”
Lee Jaseung accepted the gratitude with nothing more than a light nod.
The next day, Seo Seong Securities began to buzz.
The PBS department had landed its first client—and a twenty-billion-won deal at that. The rumor spread with almost no effort. Seo Minjae had been racing around for days, stirring up Legal, Risk Management, Compliance, the Bond desk, and half a dozen other teams just to get the paperwork done.
“Wow, a deal in only two weeks.”
“Even a half-baked chaebol is still a chaebol, I guess. Connections… Gah!”
“Ahem. Good morning, Manager.”
The employee cleared his throat and bowed. Seo Minjae was standing at the coffee machine. He pretended not to notice the man whose foot had just been stepped on and smiled brightly.
“Everyone’s gathered here, I see.”
“I hear the first deal is twenty billion? Congratulations. But what kind of strategy made you steal our kid?”
The bond-team leader was the one fishing. Seo Minjae had needed a U.S. Treasury trader and had borrowed one from the bond desk; curious eyes immediately locked onto the question. Seo Minjae smiled and sidestepped.
“Can’t say. Client confidentiality.”
“Come on, you borrowed our guy. Just a tiny hint.”
After a round of awkward refusals, repeated pleading, a little push-and-pull, and some light sparring, Seo Minjae finally sighed as if he had no choice.
“This stays between us, Team Leader.”
“Of course. What do you take me for? Absolute silence.”
Seo Minjae was certain the news would be circulating among every team leader before the morning meeting even began.
“It’s a long position in U.S. Treasuries. The client is betting on a U.S. credit-rating downgrade.”
“A U.S. credit-rating downgrade?”
The bond-team leader’s voice jumped. Seo Minjae instantly pressed a finger to his lips.
“Team Leader. Shh.”
“Oops—sorry. I know S&P put them on negative watch, but will they actually downgrade? The U.S. has always cut a last-minute deal. I don’t think it’ll go all the way to default…”
“I thought the same at first. But after looking at the materials the client showed me… Ah, never mind. Pretend you didn’t hear that.”
Seo Minjae waved it away. The gesture only sharpened everyone’s curiosity. At neighboring tables people began shifting in their seats. The bond-team leader leaned in with an earnest face.
“I swear I won’t tell a soul. If something happens with U.S. Treasuries, our whole desk could get flipped upside down.”
Seo Minjae was already certain the information would blanket the entire firm by evening. He let the silence stretch, then dropped the real payload.
“Actually, it’s because of the corporate-bond market.”
“What?”
“Honestly, who knows whether the U.S. rating will be cut or not?”
“True enough.”
“But the mere possibility has already made the market unstable. And the first place that takes the hit is always corporate bonds. Especially names with high leverage like Yuseong Group—repayment gets a lot harder.”
“Yuseong Group bonds? Is that certain?”
“No, just an example. What’s certain in this business? I’m only saying it might be wise to tilt the portfolio a little more defensive.”
“Ah—right. Given the situation, better safe than sorry. Appreciate it.”
The bond-team leader shot to his feet. And exactly as expected, before the morning meeting even started the information had already reached every major department: the possibility of a U.S. credit-rating downgrade, and the corporate-bond distress that would follow.
Research began re-examining S&P’s negative watch. Risk Management ran stress tests on the corporate-bond book. The trading desk opened discussions on hedge overlays.
And that evening, every one of those movements reached Representative Seo’s ears.
“Get Seo Minjae in here!!!”
This work is a work of fiction. All characters, organizations, place names, and events appearing herein are entirely fictional and bear no relation to any real persons or entities. Specialized knowledge presented in the narrative has been reconstructed and dramatized for the story and may differ from actual information.