The US dollar and Wall Street fell sharply overnight partly because of the ‘sell America’ trade.<\/p>\n
Essentially, nervous investors sold down their US assets in response to Donald Trump’s threats to start a trade war against eight European countries over their opposition to his Greenland takeover plans.<\/p>\n
The other main reason was Japan’s bond sell-off, which led to borrowing costs hitting record highs for the Asian financial giant.<\/p>\n
You’re probably wondering: what has this got to do with anything? I’m getting to it!<\/p>\n
Japanese bond market sell-off<\/p>\n
For many years, global investors have been borrowing Japanese money (at very low interest rates) to purchase stocks and assets on other markets (ie. Wall Street).<\/p>\n
When Japanese rates climb, it usually leads to a big falls overseas. So it was also a contributing factor to the weak performance of the US dollar and share market overnight.<\/p>\n
Now the situation is that investors who lend money to the Japanese government are demanding much higher returns.<\/p>\n
The surge in Japan’s government bond yields coincides with Prime Minster Sanae Takaichi decision to call a snap election\u00a0on Monday.<\/p>\n
She’s running on a pro-stimulus platform, which means Japan will need to borrow a lot more money.<\/p>\n
The price of a bond and its yield (or return) move in opposite directions.<\/p>\n
So when prices go down (because lots of people are selling), the yield needs to rise in order to incentivise people to purchase those bonds.<\/p>\n
Now with that background out of the way,\u00a0 Japan’s 10-year government bond yields have jumped almost 19 basis points in two days, their sharpest rise since 2022.<\/p>\n
Meanwhile, its\u00a0 30-year yields rose 28 basis points overnight.<\/p>\n
That’s the equivalent of one interest rate hike in a single day \u2014 and the biggest daily jump since 2003 as investors are bracing for increased government spending.<\/p>\n
At 3.883%, Japan’s 30-year yield has surged to its highest level ever.<\/p>\n
\n“If there is a strong mandate following the election, that could open the door to more fiscal spending,” said Seema Shah, chief global strategist at Principal Asset Management. <\/p>\n
“It pulls a lot of global bond markets into a difficult story about debt and you can see that in the rise in borrowing costs.”<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"The US dollar and Wall Street fell sharply overnight partly because of the ‘sell America’ trade. Essentially, nervous…\n","protected":false},"author":2,"featured_media":26314,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3090],"tags":[3384,1032,51,3381,14408,1700,327,2441,976,2661,3582,14413,16,15,53393,2413],"class_list":{"0":"post-709507","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-asx","9":"tag-aud","10":"tag-business","11":"tag-dollar","12":"tag-dow-jones","13":"tag-economy","14":"tag-gold","15":"tag-markets","16":"tag-nasdaq","17":"tag-oil","18":"tag-sp","19":"tag-sp-500","20":"tag-uk","21":"tag-united-kingdom","22":"tag-usd","23":"tag-wall-street"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115929695303265185","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/709507","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=709507"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/709507\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/26314"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=709507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=709507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=709507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}