⚠️Is Japan's Bond Market collapsing?

Is the world's third-largest bond market an elephant in the room?

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Japan just saw the weakest 20-Year Government Bond Auction since 1987!

This was in terms of the tail, or the gap between average and lowest-accepted prices.

Overall demand (the Bid-to-Cover Ratio) was the lowest since 2012.

This was way worse than expected and sent government bond yields even higher.

The 40-year yield hit an all-time high while the 30-year yield reached the highest since that maturity was first sold in 1999.

The 20-year yield hit its highest since 2000.

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This is a biblical move. This also creates a risk for carry trade unwind as Japan’s long-term government bonds now offer an attractive alternative in terms of the yield.

Carry trade unwind is still a major risk for global markets

The Bank of Japan has put itself into a corner after decades of monetary policy easing

globalmarketsinvestor.beehiiv.com/p/carry-trade-unwind-is-still-a-major

Will the Bank of Japan step in to the rescue, or will it wait until falling bond prices trigger some domestic financial institutions to break down?

They can stop reducing the size of their balance sheet, implement the yield curve control on the long-term bonds, and lower interest rates to near zero again.

For full insight, I also recommend reading the Saturday’s warning about rising yields linked below:

⚠️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.

globalmarketsinvestor.beehiiv.com/p/chart-of-the-week-every-investor-should-watch-the-us-and-the-japanese-bond-markets

INVESTMENT PORTFOLIO UPDATE (April 29, 2025)

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globalmarketsinvestor.beehiiv.com/p/investment-portfolio-update-april-29-2025

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