Systemic collapse of the global bond system

Japan's bond market collapse
The yield on Japan's 40-year bonds soared from 2.09% to 3.6%, reaching a historic high. The auction demand for 20-year bonds was the weakest since 2012, and bond market liquidity has fallen to its lowest in two years, with market participants demanding the central bank stop tapering its bond purchases.

The US bond market is collapsing in sync.
The US 10-year yield surged to 4.58% in April, the sharpest one-day swing in 20 years. Moody's downgraded the U.S. credit rating by about $800 billion in basis trading, which was forced to close its position.

What signal is this? Triple confirmation of the global bond collapse.
1. Synchronization = Systematic
The U.S. 30-year Treasury bond has surpassed 5%, while the Japanese 40-year JGB has soared to 3.45%.

2. Liquidity Exhaustion = Structural
The U.S. Treasury market is experiencing a "cash grab" phenomenon similar to that during the COVID period in 2020.
Japan's bond market functional indicators have fallen to a two-year low.

3. Foreign capital withdrawal = De-dollarization
The market is worried that foreign capital is fleeing from U.S. assets.
China is the second largest foreign holder of US debt and may strategically sell off.

The special significance of Japan
Why is the Japanese bond crisis a key signal?
1. Japan has always been a pillar of the dollar system.
- For decades, JGB has been the global interest rate anchor.
- Yen arbitrage trading supports global liquidity
- Japan is a major buyer of U.S. debt.

2. When there are no buyers for Japanese bonds...
- JGB yield of 3.45% marks a systemic break.
- The concept of "safe assets" globally has collapsed.
- The investment portfolios of insurance companies, banks, and pension funds are fundamentally shaken.

Structural Evidence:
- Concurrent dual bond crisis - Random event with extremely low probability
- Safe-haven assets become ineffective - Bonds are no longer a safe-haven choice during stock market crashes.
- Liquidity tools have failed - Even arbitrage tools like basis trading have been forced to close positions.

Behavioral evidence:
- Central bank behavior changes - Even the Bank of Japan has been asked to stop tapering asset purchases.
- Government Response - The Japanese Prime Minister said the financial situation is worse than during the Greek debt crisis.
- Trump forced to retreat - Bond market forces Trump to suspend tariffs

We are witnessing the biggest financial restructuring since the collapse of the Bretton Woods system in 1971.