Japanese Bond Crisis, US Yields Rise

30-year sovereign bond yields jump a massive +30 basis points today (Chart 1, Bloomberg), it’s a $7T market, something will break, as Prime Minister Takaichi's proposes to cut food taxes (unfunded). In a country with gross debt/GDP 260%, and last year just 700,000 births for 120 million people. In March 2023 the yield spike broke several banks (inc Silicon Valley Bank), Japanese yields are now a 27-year high and accelerating.

US longer yields are rising with it, the10yr rises +5bp (Chart 2, Bloomberg), remember the 30-day trading range for the 10-year note yield on Friday was the tightest since 1972. Crowded trade unwinds from a low vol period can be sharp. The US curve steepens 2s10s up +6bp, the dollar is down hard, equities will open lower with Nasdaq -1.7% (broken support lines) but of course precious metals LOVE IT with silver +5%.

Nasdaq futures will open lower after the holiday (Chart 3, Bloomberg). Another crowded trade ripe for an unwind, just waiting for the trigger.

UK PAYE payrolls fall 43k in Dec, a 4th straight monthly decline

Australian OIS market now prices 35bp of HIKES this year, Dec Melb Institute Inflation Gauge rose to 3.5%yoy with trimmed mean also picking up.

According to Polymarket, Democrats currently have an 80% chance to win the midterms.

Japan, a nation of 120 million, had just 700,000 births in 2025

U.S. natural gas futures closed +18.7% yesterday.

Data today – German ZEW