Japanese Investors Sell Foreign Bonds Driving Global Yield Surge
Japanese investors are selling U.S. and French government bonds as rising domestic yields reverse the carry trade and push Western borrowing costs higher.
Japanese investors are selling off foreign government bonds, triggering a yield surge in both United States Treasuries and French OATs. This shift follows a period where the carry trade allowed Western governments to maintain large deficits at low costs by leveraging low Japanese interest rates.
As yields for bonds issued by the Government of Japan reach 30-year highs, the incentive for the carry trade has reversed. This has led to relentless selling of U.S. Treasuries, pushing 10-year yields to multi-decade highs. The trend has now expanded into the French bond market, where similar selling pressure is driving yields higher.
