Rising Japanese bond yields could shake global carry trade, crypto

Cointelegraph

Japanese government bond yields have jumped to their highest level in decades, prompting some analysts to speculate that it could be behind the recent crypto market sell-off on Sunday.

Japan’s ten-year government bond yield hit 1.86% on Monday, its highest level since April 2008, according to MarketWatch.

Yields in the ten-year bonds have almost doubled in Japan over the past 12 months. Japan’s two-year bonds also hit 1% for the first time since 2008.

While 1.86% is not a substantial yield from government bonds, it is significant because it marks a shift, as Japan has had a very low interest rate environment for decades, with negative or close to zero rates prevailing for the most part, and a very stable bond market.

This has encouraged institutional investors around the world to borrow low-interest JPY from Japan to buy higher-yield, riskier assets, in a strategy called the “Yen Carry Trade.”

“Trillions borrowed in yen, deployed into US Treasuries, European bonds, emerging market debt, risk assets everywhere,” explained economics author Shanaka Anslem Perera, who said, “That anchor is now breaking.”

Japan’s bond yield hike is bad timing for US

Japanese institutions hold approximately $1.1 trillion in US Treasury securities, and is the largest foreign position, explained Perera.

“When domestic yields rise from nothing to nearly 2%, the math changes. Capital that flowed outward for decades faces pressure to repatriate.”

Related: Bitcoin crashes 5% in ‘Sunday slam’ as liquidations surge

The timing couldn’t be worse for the United States, as it comes when the Federal Reserve terminates quantitative tightening, and when the US Treasury requires record issuance to finance $1.8 trillion deficits, he stated.

“When the world’s creditor nations stop funding the world’s debtor nations at artificially suppressed rates, the entire post-2008 financial architecture must reprice.”

Analysts warn of a possible flight to safety ahead

This could impact the cryptocurrency market in several ways. Bitcoin (BTC) and cryptocurrencies typically thrive in an era of ultra-loose monetary policy and low interest rates globally.

When Japan provided an abundance of cheap money through the carry trade, some of that capital flowed into riskier assets, such as crypto and US tech stocks.

If that liquidity reverses and flows back to Japan, there will be less speculative capital available for crypto markets.

“Crypto is usually the first place where all of this shows up. It sits at the highest end of the risk spectrum, so even small shifts in liquidity lead to sharp moves,” said DeFi market analyst “Wukong.”

If global bond markets reprice violently, investors typically flee to safety first, resulting in a sell-off of all risk assets as people scramble for cash and liquidity.

Magazine: Animoca’s bet on altcoin upside, analyst eyes $100K Bitcoin: Hodler’s Digest

Advertencias de riesgo y descargo de responsabilidad en inversiones

Usted entiende y reconoce que existe un alto grado de riesgo a la hora de operar con estrategias. Al seguir cualquier estrategia o metodología de inversión existe un riesgo potencial de pérdidas. El contenido de este sitios se ha proporcionado por nuestros colaboradores y analistas con un único propósito informativo. Usted, bajo su discreción, es el responsable exclusivo de determinar si los activos bursátiles, valores o estrategias de los productos son adecuados para usted según sus objetivos de inversión y situación financiera.

Divulgación de riesgos

El riesgo de pérdida en el comercio de activos financieros como acciones, divisas, materias primas, futuros, bonos, ETF o criptomonedas puede ser considerable. Puede sufrir una pérdida total de los fondos que deposita con su corredor. Por lo tanto, debe considerar cuidadosamente si dicha negociación es adecuada para usted tomando en cuenta sus circunstancias y recursos financieros.

No se debe considerar invertir sin llevar a cabo, su propia diligencia de manera minuciosa o consultar con sus asesores financieros. Nuestro contenido web puede no ser adecuado para usted, ya que no conocemos su situación financiera ni sus necesidades de inversión. Es posible que nuestra información financiera tenga latencia o contenga inexactitudes, por lo que usted debe ser completamente responsable de cualquiera de sus transacciones y decisiones de inversión. La empresa no se hará responsable de su capital perdido.

Sin obtener el permiso del sitio web, no se le permite copiar los gráficos, textos o marcas comerciales del sitio web. Los derechos de propiedad intelectual sobre los contenidos o datos incorporados a este sitio web pertenecen a sus proveedores y comerciantes de intercambio.

Búsquedas recientes

Búsquedas populares

Cotizaciones

Análisis

Usuario

24/7

Calendario económico

Educación

Datos

Rising Japanese bond yields could shake global carry trade, crypto

Divulgación de riesgos