In case you missed out on this, it's not just all about Trump and his shenanigans this week:
- Japan bond yields continue to surge higher on the week
- This is the scariest chart I've seen in years
- JGB sell-off jars global rates as election fiscal fears flare, but some respite today
- Japan opposition urges bond buybacks as JGB volatility intensifies
One of the most important developments right now is what is happening with the Japanese bond market. The Takaichi fallout continues as Japan bond yields surged with a steepening of the curve. 40-year yields hit the 4% mark for the first time ever and 30-year yields were not too far away from crossing that line yesterday.
The selloff this week has been rather intense. If you wind back the clock, to think about a 40 bps range for Japanese yields might be something that could be fit into a yearly range or longer. In the present case, it's what we're seeing with a weekly range instead. Wild.
Now, the bond rout this week is finding a bit of respite today. 30-year yields are down some 20 bps to 3.71% currently. And while that seems like a sizable move, yields in that tenure are still up 22 bps this week alone after accounting for today's slide.
Policymakers in Tokyo will have to try and figure out what to do soon, as markets don't appear to be letting up in the big picture. The relief today doesn't hint at one that might be sustainable, that especially since the fundamentals driving the move have not changed whatsoever in the past 24 hours.
The Takaichi trade is still very much alive with market players anticipating her to consolidate power after calling for a snap election for 8 February. From before:
The dam that has been holding back the risks involving Japan's ballooning fiscal and debt position is breaking. And alongside the dollar falling out of favour, this is another key reason pushing traders and investors to lean towards the likes of gold in such a time.
