The Bank of Japan's interest rate hike signal is coming, what logic is hidden behind the rebound of U.S. Treasury yields?

Question

[Block Rhythm] Recently, the yield on the 10-year U.S. Treasury has been a bit restless, jumping directly to 4.086%, rebounding nearly 3.12% from a low of 3.962% a few days ago. Behind this fluctuation lies the interest rate hike signal released by the Central Bank of Japan.

Speaking of which, Japanese investors are the number one overseas buyers of US Treasuries. In the past, when domestic bond yields in Japan were pitifully low, they were willing to bear exchange rate risks to buy US Treasuries. But now the situation has changed—once the Central Bank of Japan raises interest rates, the yields on Japanese Government Bonds (JGB) start to climb, for example, the 10-year Japanese government bond yield has already surpassed the 1% mark. At this point, the calculations of Japanese funds have changed: why bother to buy US Treasuries? Isn't it more appealing to buy Japanese bonds right at home?

Therefore, selling US bonds and capital flowing back to Japan became a natural choice. As US bonds are sold off, prices fall, and yields must rise. When yields rise, the cost of borrowing in US dollars globally rises accordingly, putting significant pressure on risk assets (including the stock market and cryptocurrencies). The current rise in US bond yields is actually the market reacting to the Bank of Japan's signals for interest rate hikes.

WalletAnxietyPatient · Accepted Answer

As soon as the Japanese raise interest rates, the money will start flowing back, and now U.S. bonds will be smashed, making the days of borrowing in dollars tough for the world...

SchroedingersFrontrun · Answer

Are the Japanese starting to withdraw? This makes US bonds a bit precarious, as they were previously relying on them to catch a falling knife.

MergeConflict · Answer

As soon as Japan raises interest rates, the whole situation changes, funds flow back, and US bonds come under pressure. This trap logic is actually quite clear.

DegenWhisperer · Answer

The Japanese people are amazing with this move; as soon as their domestic bond yields rise, they dump US Treasuries. This logic is unbeatable.

ForkTongue · Answer

Japanese players are really starting to withdraw, and now US debt is going to suffer.

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It&#39;s the Bank of Japan causing trouble again, and US debt is going to cry this time.

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Wait, is Japanese money recovering losses? We need to be careful then.

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US debt yields are soaring, and behind this is the rhythm of those Japanese investors wanting to Rug Pull.

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JGB has broken 1%, so the Japanese really have no reason to mess with US debt anymore.

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To put it simply, it&#39;s still a game of interest rate differentials; who would buy expensive when there are bargains?

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This logic is very clear, but the market reaction will likely lag.

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Once the Bank of Japan raises interest rates, the situation changes, and US debt needs to be revalued.

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Is capital flowing back to Japan? We need to keep an eye on whether there will be further rate hikes.

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The cost of borrowing in dollars is going to rise, what does this mean for the crypto world?

MetaMasked · Answer

The Japanese have run away, and U.S. Treasury yields are rising. This logic has actually been clear for a long time...