🔻 What’s Driving the Market Sell-Off?
• Japanese bond yields have spiked to levels last seen in 2008, hinting that the BOJ could finally hike rates on DeC 19.
• For years, Japan’s ultra-cheap yen funded global risk-taking through the carry trade.
• With yields now climbing, money is flowing back into Japan, pressuring that entire trade and forcing investors to cut positions.
• Tokyo is also issuing more short-term debt, adding extra upward pressure on yields and accelerating capital repatriation.
• A stronger yen is squeezing leveraged bets worldwide, pushing traders to exit risk assets.
• Japan holds the largest stash of U.S. Treasuries so any pullback in buying affects America directly.
• The timing is terrible for the U.S.:
– record-high deficits (~$1.8T)
– annual interest costs over $1T
• At the same time, the Fed isn’t buying Treasuries and China is reducing its holdings.
• With major buyers stepping back, global yields rise, and liquidity gets pulled out of the system, sparking sell-offs across stocks, bonds, and crypto.
U.S. markets open at 1:30 PM UTC. If they weaken further, expect the global bleed to continue.
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