Did Japan's finance minister threaten liquidation of US Treasuries?
Addressing a question on a Tokyo TV program on Friday, Japan Financial Minister Kato said the country's $1.1 trillion in Treasury holdings - the highest of any foreign creditor - could be a "negotiation card" in its trade talks with Washington but "whether or not we use that card is a different decision." In other words, Japan is threatening to sell some/all of its $1.1 trillion in bonds if tariffs are imposed. NLI Research Institute said just minutes after the TV remarks, "Katsunobu Kato’s comments on US Treasuries could be interpreted as dangerously provoking the US government." He added that for the US, unstable long-term rates are a concern, and having Japan continue to hold US Treasuries is beneficial, while maintaining fiscal soundness and the dollar’s status as the reserve currency are important issues that would have positive effects in the medium to long term. Translation: chaos in the US would be painful, but it would be catastrophic for Japan. Source: www.zerohedge.com
Correlations among US stocks, bonds, dollar are at the highest level since at least 2019 - Piper Sandler
Source: Gunjan Banerji @GunjanJS
In case you missed it:
30 year Japanese government bond yields have climbed even more sharply than their US counterparts. Since April 2, Japan’s 30y yield has risen 33bps, while the US 30y yield is up 29bps over the same period. Source: (HT @bilalhafeez123), HolgerZ, Bloomberg
The US bond market just delivered a vote of no confidence in Trump.
The yield curve is steepening sharply, w/2s/10s yield spread rising to 109bps — the widest gap since 2020. Source: Bloomberg, HolgerZ
BREAKING: US 10Y Treasury yield rises to 4.48%, the largest single weekly increase since 2001.
U.S. 30-year treasury yields rise to 4.95%, weekly increase is biggest since 1982. Source: unusual_whales
Oups! When the trade war clashes with the yield war...
It seems that China is ready to retaliate by weaponizing US Treasuries‼️As the US threatens to impose ADDITIONAL Tariffs on China of 50%, effective April 9th, China responds by selling another $50BN in Treasuries ‼️Oh by the way, the yield on 10Ys is now almost unchanged from Liberation Day! 😨 Source: zerohedge, Bloomberg
China is getting ready to retaliate.
Putting upward pressure on US Treasuries (by dumping UST) could be their own "art of a deal"... Other options: China has basically three options: 1. Concede defeat to whatever terms Trump demands 2. Devalue the yuan by 20-40% (watch the offshore yuan this morning...) 3. Unleash biggest fiscal stimulus in its history (talking $2-3 trillion)
The VIX Is Pricing In A Recession, While Junk (Still) Sees Zero Risk
➡️ SocGen's Jitesh Kumar writes that high yields spreads remain below 4%, and "we have never been in recession with high yield spreads below 4.5% (data going back to 1987)." In other words, US HY credit spreads are pricing in 0% recession probability. ➡️ However while credit remains complacent, one asset is starting blast a recession warning siren: according to UBS trader Antonya Allen, the VIX is now pricing in a recession. Which one will be correct? Source: SocGen, www.zerohedge.com
