Japan's bond crash? 40-year yield "breaks 3.6%" hitting an 18-year high, experts warn: perfect storm approaching

Yields on Japan's long-term government bonds soared to an 18-year high, the government acknowledged the drag of fiscal deterioration and experts spoke out that there were signs of deterioration, and the market was highly concerned about its potential impact on the Japanese economy and global capital flows. (Synopsis: Warren Buffett is also panicking? Berkshire Hathaway's 90 billion yen bond "hit the smallest record in history", and the Japanese stock index plunged 1,000 points) (Background added: rich dad warns "the end of the world is coming": no one buys US bond auctions, bitcoin will rush $1 million) Japanese long-term bond yields climbed significantly in May 2024, and the yield on 40-year government bonds rose 6 basis points today (22) to hit the highest level since 2007, once reaching 3.675%, The yields on 30-year and 20-year bonds have also reached or approached all-time highs. It is in line with market expectations that its government finances and repayment capacity will decline. Experts also warn that a perfect storm could form. The reason for the soaring yield rate? Japan has been bidding for new long-term public bonds since the day before yesterday (20), respectively from 20-year, 30-year, and 40-year labels, and the sales results are miserable, but also caused market panic, the bidding scale in the 20-year public period is about 1 trillion yen, but the market does not pay, the bidding multiple is only 2.5 times, and the tail difference is 1.14, setting a record for the worst public bond sales since 1987. The tail difference, which indicates the ratio of the average auction price to the lowest spread, has now reached 1.14, which is equivalent to the fact that there are no longer people willing to grab debt at high prices in the market, so the market believes that the risk has increased, and many faces have the possibility of financial deterioration. The first is the recent policy shift by the Bank of Japan (BoJ), phasing out ultra-loose monetary policy and tapering bond purchases, resulting in fewer large, price-sensitive buyers in the market. It is reported that the Bank of Japan still holds about 52% of the JGB market share. The recent fiscal situation in Japan has also raised deep concerns, with growing concerns about Japan's fiscal sustainability. Japan's debt-to-gross domestic product (GDP) ratio has exceeded 250%. According to Bloomberg, important Japanese politician Shigeru Ishiba has publicly opposed tax cuts and warned: The pressure on social welfare spending caused by the aging demographic structure also makes the fiscal outlook worse. In addition, as the yield of US Treasury bonds climbs, there is also pressure on the outflow of Japanese bond funds. Experts warn: steep, perfect storm Market experts generally express concern about the sharp rise in yields, which is significantly exacerbating Japan's fiscal pressures. Given its extremely high debt burden, rising borrowing costs could force the government to face a difficult choice between fiscal austerity or tax increases in the future. Bank of America Securities notes that this upward spiral is called steeping, but in fact steepening is a global trend in which higher inflation, economic growth, and government fiscal pressures are expected: "We believe that the risk of steeping is more pronounced in the United States, followed by Japan, the Eurozone and the United Kingdom." The current market turmoil has been described by some observers as a "perfect storm", with NAB chief economist Sally Auld explaining that rising inflation means the BOJ may reduce bond purchases in the future, making the market more reliant on retail and institutional investors outside the central bank. It feels like the JGB market is facing a perfect storm, and overall investors are more alert and cautious about the long end of the yield curve and rising premiums. Naomi Fink, global chief strategist at Nikko Asset Management, also warned of the Japanese government's fiscal warnings, but he believes that the chance of a large-scale escape from Japanese bonds is not high, but there will be an adjustment in higher yields. Looking ahead, how effectively the Japanese government manages its massive debt, and the subsequent adjustment of the Bank of Japan's monetary policy, will be a key determinant of capital flows in the Japanese bond market and globally. Related stories Bitcoin breaks a new high of $110,000! Trump's tax reform detonated the 20-year US bond yield soared above 5%, and the US stock market was completely wiped out Financial Times: Taiwan's debt frog suffered an average blood loss of 11-12% in May! The U.S. bond ETF market is too monolithic Tether holds $120 billion in U.S. bonds "the 19th largest in the world" surpassing Germany, and has made $1 billion in Q1 this year (Japanese bonds crashed? The 40-year yield "broke through 3.6%" to hit an 18-year high, experts warn: the perfect storm is coming" This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".