- Κυρ Δεκ 07, 2025 3:05 pm
#222
Japan's 10 year Government Bond Yield just hit 1.949% which is its highest level since 2006.
The reason this should terrify every investor on earth is because over the last 30 years Japan was the anchor of the Global Financial System with the Yen carry trade, which consists of borrowing cheap yen at 0% interest rates and use that money to buy higher yielding assets like US Bonds but now that anchor is snapping as the Bank of Japan is being forced to raise interest rates as inflation rises.
This is where things get dangerous for all of US because Japanese Institutions hold roughly $1.1 trillion of US Treasuries, the largest foreign position in the world and when yield in Japan rise from 0% to nearly 2% the entire logic of holding foreign bonds begins to collapse and this is all happening all the while the US needs record levels of new borrowing as well as China continuing to reduce its exposure to American debt creating a wide vaccum of buyers for US Bonds.
The reason this should terrify every investor on earth is because over the last 30 years Japan was the anchor of the Global Financial System with the Yen carry trade, which consists of borrowing cheap yen at 0% interest rates and use that money to buy higher yielding assets like US Bonds but now that anchor is snapping as the Bank of Japan is being forced to raise interest rates as inflation rises.
This is where things get dangerous for all of US because Japanese Institutions hold roughly $1.1 trillion of US Treasuries, the largest foreign position in the world and when yield in Japan rise from 0% to nearly 2% the entire logic of holding foreign bonds begins to collapse and this is all happening all the while the US needs record levels of new borrowing as well as China continuing to reduce its exposure to American debt creating a wide vaccum of buyers for US Bonds.