Japan’s Bond Market Turmoil Sparks Fears of US Capital Flight and Global Fallout

Japan’s bond market is flashing warning signs as yields on long-dated government debt surge to dangerous levels. The 30-year yield jumped more than 60 basis points to 2.914%, while 20-year bonds saw yields rise over 50 basis points. Demand for ultra-long bonds has collapsed, with Reuters noting the weakest appetite for 40-year debt since July 2023.

The turmoil threatens to trigger a massive unwind of the yen carry trade. Japanese investors, among the largest holders of US stocks and Treasuries, may soon repatriate capital en masse. Macquarie analysts warn of an approaching "trigger point" that could see rapid withdrawals from US markets. Societe Generale’s Albert Edwards paints an even darker picture, suggesting this could lead to "global financial market Armageddon," with US tech stocks particularly vulnerable.

Market participants are weighing the implications of what Tidal Financial Group’s Michael Gayed calls a "ticking time bomb" for global confidence. The unfolding crisis underscores the fragility of interconnected financial markets when traditional SAFE havens lose their luster.