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- ⚠️CHART OF THE WEEK: Every investor should watch the US and the Japanese bond markets
⚠️CHART OF THE WEEK: Every investor should watch the US and the Japanese bond markets
Japan's 30-year government bond yield hit 3.0% for the first time in 25 years.
Global Markets Investor
May 17, 2025
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Japan's 30-year government bond yield hit 3.0% for the first time in 25 years.
Moreover, 40-year yield hit 3.45%, the highest since its debut in 2007.
Gold hitting record highs
The price of gold keeps heating up. If the record-breaking year of 2024 wasn't enough, gold hit a major historic 2025 milestone by crossing the $3,000/ounce threshold!
Here are 3 Key Reasons:
Looming economic & political uncertainty
Increasing central bank demand
Rising National Debt - over $36 Trillion
So, could gold surge even higher?
According to a recent statement from Jeffrey Gundlach, famed American business man and investor… “Gold continues its bull market that we’ve been talking about for a couple of years, ever since it was down to $1,800.” He expects gold to reach $4,000/oz.
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This comes as the supply of these long-maturity bonds exceeds demand for them. Since July, the Bank of Japan’s ownership of Japanese government bonds has been declining.
At the same time, the country’s life insurers have not stepped in enough to fill the gap left by the BoJ.
Notably, the Bank of Japan holds ~52% of all government bonds outstanding, while life insurers, banks, and pension funds, 13%, 10%, and 9%, respectively.
Japan’s bond market size is $7.8 trillion, only behind the US and China. Japan is also the most indebted developed nation, with debt-to-GDP at 255%.
Rapidly rising government bond yields will eventually lead to higher costs of borrowing, such as mortgages or investment loans, which could significantly lower economic growth. Additionally, the government has to pay more to borrow money and has to refinance debt at a higher cost, which also limits economic growth due to a lower ability to invest and spend.
Lastly, rising yields mean unrealized losses on investment in bonds by financial institutions such as banks. If losses grow too quickly and too high, that could create financial market instability. We are in uncharted territory here. If things get out of control, the Bank of Japan will likely accelerate its government bond purchases.
Meanwhile, the US 30-year Treasury yield is flirting with the 5.0% handle once again. The last time it was trading at this level, the US administration panicked and paused tariffs.
This time, it is likely related to higher-than-expected economic growth after the tariff pause (sounds naive) and rising concerns about US deficits and public debt. Interestingly, Moody’s downgraded the US credit rating on Friday after the market closed due to concerns about the whole fiscal situation.
In the below comprehensive analysis, I outlined what kind of consequences await ordinary people and investors due to the worsening US debt crisis.
The entire world should be now watching the world's largest bond market and the Japanese bond market.
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