Bloomberg/Michael Mackenzie and Chikako Mogi/5-2-2022
“In times of Treasury turmoil, the biggest investor outside American soil has historically lent a helping hand. Not this time round. Japanese institutional managers — known for their legendary U.S. debt buying sprees in recent decades — are now fueling the great bond selloff just as the Federal Reserve pares its $9 trillion balance sheet.”
USAGOLD note: Nothing will fuel a quick end to quantitative tightening (see immediately above) like the prospect of a bond market implosion and the federal government having difficulty financing its high maintenance spending habits. Japan and the Fed exiting the bond market as buyers at the same time could turn out to be the straw that breaks the debt markets back. Note, too, that it is not simply that Japan is refraining from new purchases. It has reversed field and is now a seller. As reported here a couple of weeks ago, the high cost of hedging currency volatility is the incentive for unloading U.S. Treasuries.
