🇯🇵Major Overlooked Risk To Global Bond Markets:
Japan Upper House Elections Jul 20

🇯🇵Upper House elections have already been pushing long-dated JGB & UST yields↑ MTD & YTD as is

But it’s outcomes can trigger a potentially massive surge in global yields

What you need to know🧵 1/
After soaring in March, April, then blowing out to record highs in May, JGB long end yields are back up to ATHs from July 3rd: start of 🇯🇵Upper House campaigning

Meanwhile UST long end has just gone blindly along for the ride

Yes, UST yields↑ are being driven by 🇯🇵elections currently.
This is now the 4th time (out of 4 times) in 2025 where a decisive upside move in UST long end yields is being driven out of 🇯🇵 & JGBs.
So, for those who are STILL resorting to looking for UST price behaviors via solely US-centric matters (& thereby coming up with nothing / having to cram in some irrelevant “reason”) - you should really get on board with monitoring the JGB situation - or, as I have been identifying as the world’s most dangerous market that is now in the midst of an extremely dangerous moment

BTC vs 🇯🇵JGBs

As BTC correlation vs NDX falls, BTC has actually sustained price action mirroring long-end JGB yields.

And both recently blowing out to new ATHs

🧵Excerpt/preview from my upcoming work on JGBs vs 🌎cross-asset markets

“JGBs: World’s Most Dangerous Market”
👇 1/
From ‘24:

BTC rally to new ATHs outperforming risk assets, then loses steam & falls, then stabilizes (all within uptrend)

2 notable times:

Mar’24: 🇺🇸listed spot BTC ETFs + BTC halving

Nov’24: Trump elected
(Prob missing others & I don’t care if so)

Why are JGBs relevant?

🇯🇵Japan At War With Markets:
Anatomy of Yentervention Week

Last week-

Mon: USDJPY > 160
🇯🇵MOF shots fired, $JPY ↓ to 155

Thurs: post-FOMC Powell
🇯🇵MOF (at 🇯🇵5am) hits $JPU ↓ again

By end of week, ¥9tn of JPY buying for -5% on USDJPY

Why is it not working?

Here’s why🧵 Need to analyze the various actors, instruments (spot FX, futures etc), flows & behaviors involved

1/
🇯🇵MOF

At 1st glance, seems MOF yentervened Mon, & then further 🇯🇵Thurs AM right after Powell press conf - i.e. 1 continuous effort

But I think these were 2 independent acts:

•Thurs post-FOMC likely was premeditated & market-unconditional yentervention that was going to happen anyway

•Mon was a reaction to markets as USDJPY cracks 160 (vs 155 on AM of prior trading day - BOJ Friday)

This difference matters because it changes how we/MOF themselves look at Law Of Diminishing Effects (LODM) with yenterventions.
IF Thurs post-FOMC was indeed pre-planned & Mon was forced defense, then:

LODM for TIME INTERVALS (each yentervene act lasts for less time until next) wouldn’t apply here, where ‘22 yenterventions had 1 month between each in Sept & Oct, vs 4 days between 2 yenterventions last week, because the premeditated chronology. That’s not to say LODM for time doesn’t exist (I think it does), but just means it doesn’t apply under this schedule-dependent, market-unconditional approach assumption.

But - LODM for SIZE/AMOUNT (each yentervene act requires more ¥ buying / $ selling to achieve same result of -¥5 big figure drop in USDJPY) would NOT be contradicted here either- as Mon yentervention was estimated ¥6tn vs ¥3tn Thurs - i.e. Thurs got ~same -¥5 drop but at ½ the cost. Does this mean each successive yentervention costs LESS each time? Of course not - & this premeditated post-FOMC may be the explanation:

Trading liquidity profiles to be able to absorb blasting USD in spot market + market focus/awareness is much higher for Mon mid-Asia hours vs end of NY close after Powell steps off podium, when markets are way more caught-off-guard (& doesn’t matter if Mon was 🇯🇵 “holiday” - USDJPY 155 → 160 in 2 days means all FX traders everywhere are at desks)

And if Thurs was surgically pre-planned, vs Monday was reactive to a shock 160-print, then Mon execution was more so done in an indiscriminate “spray and pray” manner, in which the BOJ market operations desk would call up the institutions to blast USDJPY at 1PM, and then also telling those dealers to “stand by… may not be done here quite yet…”

So, instead of the previous clip, likely was more along the lines of this👇

🇯🇵”BOJ” Market Review-

Bulletproof 🇯🇵 equity rally finally cracks in 🇯🇵PM session after BOJ policy release

BUT..

Has nothing to do with BOJ

Rather, 🇯🇵market sharp intraday -1.4% drop is due to 🇨🇳China’s latest attempt to rescue their sorry market

🧵 Heres how this happened👇 1/
First of all-

BOJ policy was unchanged, & in-line with unanimous expectations

No shock & awe widowmaking, no early Nikkei press-leaking fuckery (& no late-wait release either), policy released at noon during AM & PM sessions with plenty of time to “digest” a no-change, before PM trading begins

BOJ was extremely nothing, just as consensus had expected

So regardless of what actually caused NKY to crash at an arbitrary time in the PM session, one thing we can eliminate from the list of possible causes that shook up 🇯🇵 equities is the Jan BOJ policy release.

NKY is +10% “YTD” (in the 13 trading days of Jan’24), & opened nearly +1% up today for yet another new multi decade high in the AM OF BOJ DAY.

Clearly NKY is moving completely independent of what BOJ is/isn’t doing / not doing / expected to do / not do, and has been for… like.. 7~8 years? Certainly for the last 2 years of massive outperformance.

Yet, that’s clearly not what’s going on out there in market commentary land (Japanese as well as English)- people are trying to force-fit some BOJ story into the behavior of green & red blinking tickers

🤡

Things to note ahead of 🇯🇵BOJ Gov official nomination to succeed Kuroda expected ~🇯🇵11am (soon)

1/ I don’t care if I’m the only voice, NOR if Kaz Ueda ends up being nominated- I’ll just keep repeating:
THERE IS NO BOJ GOV NOMINEE UNTIL PM KISHIDA

Regardless of who it is/not.. 2/
DO NOT read to deep (if at all) to the immediate market reaction, including any LACK of

Not (just) because NOBODY knows WTF they’re talking about regarding “___ person → ___ BOJ policy” (yes 100% very much including me)

But because of 2 potential mkt move catalysts coming

🇯🇵BOJ fires off its newly updated YCC sidearm weapon against JGB sellers without having to directly buy JGBs from Jan MPM

& finds success as JGB yields collapse (& thereby DM yields ↓)-for now

So WTF is this 🇯🇵BOJ “Funds-Supplying Operations against Pooled Collateral”
(thread) 2/
The announcement of this Funds-Supplying Operations against Pooled Collateral went somewhat under the radar from the int’l community among the BOJ Jan 18th MPM releases, in part due to the intense level of focus on “YCC no change”

Yet it’s a critical tool for BOJ keep YCC’ing

https://twitter.com/Bank_of_Japan_e/status/1615539504747810818

🇯🇵JPY (USDJPY) price action explained (thread)

Many questions on ¥, especially- why is ¥↑ (& so aggressively) since BOJ’s Dec’22 YCC shock?

1/
Indeed, ¥ has undergone a sharp reversal after being worst major FX vs $ in most of ‘22:
USDJPY
Start ‘22 115→ 152 high→128 curr 2/
First, need to look at WHY JPY was crushed to 3 decade lows (USDJPY→ 3 decade highs) over ‘22 in the first place

Short ¥ (or long USDJPY, abbreviated as “$¥” from here forward) was THE global macro trade in ‘22, & in part a “🇺🇸Fed Trade”

A very profitable trade, but crowded

🇯🇵HEADS UP: BOJ PRESS TEST

🇯🇵Yomiuri News today: BOJ to review neg side effects of its outsized JGB buying policies at next week’s Jan MPM, implying further tweaks to YCC after/despite Dec MPM shock

¥↑, ¥ implied vol↑
JGB 10Y yield >50bp cap
JGB futures↓ to 9yr low

(Thread)

https://twitter.com/business/status/1613373206408175621

1/
Why this is BOJ Press Test in my view:

🇯🇵targeted, isolated clean(est) mkt read before 🇺🇸CPI takes over mkts

(“Press Test” ←BOJ use of media to “leak” potential policy ∆s ahead of MPMs to watch mkt reaction, which unlike official policy statements, can be taken back)

🇯🇵HEADS UP:
BOJ today conducted FIXED RATE OPERATIONS on 2Y & 5Y JGBs for 1st time

Fixed Rate Ops are offer to buy 10Y JGB in unlimited qty at a fixed rate (current 50bps vs 25bps prev→ recent “rate hike”)

BOJ never used FROs outside of 10Y

..until now. Yes, big deal
(thread)

https://twitter.com/business/status/1607922343464026114

2/
This was/is a MAJOR shift that was announced at Dec’22 meeting (but overlooked), but w/ far more significance than recent widening 10Y JGB band

BOJ buys JGBs across entire curve via scheduled monthly buying (“Competitive Auctions”) but (ex-10Y) never before bid for UNLIMITED

🇯🇵BOJ Dec’22 YCC “shock” explained (thread)

1/
10YJGB range ±0.25%→ ±0.5% was indeed for MARKET/FINANCIAL (in)STABILITY & (dys)FUNCTION reasons

& NOT some sudden 🇯🇵>3% CPI BOJ panic (& 2days before in-line🇯🇵CPI)

OR JUST realized🌎CB’s YTD hiking

OR ¥↓ (~½ ‘22 losses erased) 2/
Kuroda’s BOJ ←most aggressive dove, & ALSO most DGAF what 🌎CBs doing

Since’16🇯🇵YCC, 🇺🇸Fed:
Rates↑
Rates↓
Held@0
Rates↑(& near end)

🇯🇵Since16: YCC & IS STILL CURRENT POLICY unch
10Y±range: 10→20→25→50

w/2 MPM left
WHY would Kuroda suddenly ditch 10yrs outlier easing?

For those saying late Oct was/n’t top in US yields…

I’m not going to say whether or not it was- may very well be/not

I’m just wondering if they realize & are factoring in what actually triggered the reversal (mkt/flow-wise) when making these UST calls..?

Hint- 🇯🇵JPY
(thread) 1/ Fri Oct 21st at ~10:30am EST:
JPY suddenly rallies nearly 3% vs USD

USDJPY 151.98 → 148 in 2hrs. Huge

But just prior to- there was $¥ momentum upside breakout +1% on the day & about to break thru 152 for new 32yr high

(This was also 10Y UST yield high, intraday/thereafter)

Pre-FOMC Price Action Context

What US equity markets are moving to/with over last 48 hours going into Fed decision & Powell press conf:

🇭🇰HK/🇨🇳China Markets

Which, after plummeting sharply last week, have been short cover rallying

Reminds me of Mar’22 post-FOMC rally (thread) 1/Recall March FOMC earlier this year when FOMC first lifted rates +25bps w/ a massive equity rally into the close w/ NDX +4%, starting from last ~10 mins of Powell press conf

had nothing to do w/ the very much expected in-line +25bp Fed hike- rather, was from 🇭🇰🇨🇳 short cover👇

https://twitter.com/acrossthespread/status/1504199423165104128

Looks like I was wrong - 🇯🇵MOF official data for Oct:
¥6.3tn in ¥entervention

However, wouldn’t say I was wrong to question / not blindly accept Nikkei’s “sources” & reporting ¥tervene definitively happened, while 🇯🇵MOF official word (& still is) “no comment”

?s remain
(Thread)

https://twitter.com/acrossthespread/status/1584305141054050304

1/
🇯🇵MOF data only shows monthly aggregate ¥ amount figure ←very purposely opaque on various

Does NOT show:
•When
•How many x’s
•How much per
&
•USD amount

Quoting ¥tervene in ¥ might as well→
“printing ¥ to buy ¥”

How much in 🇯🇵unprintable $ reserves? (data also opaque)

5/👆an ideal setup for futs traders to “mess w/” (swing) a jumpy mkt

🇯🇵Fri night 9:43 & 9:58pm (long after officials gone for weekend) as $¥ nears 152:

2 bursts of ¥futs buys for $1bn in attempt to trigger short squeeze-didn’t work
But 🇯🇵11:30pm~1am it sure did & w/ follow thru 6/ Fri $¥ was ¥ futures traders, not spot FX participants (& thereby likely not 🇯🇵gov)

Fri: ¥ futures on CME traded $50bn notional in few hours
vs Sept official 🇯🇵¥tervention amount: $20bn

So even if/unless 🇯🇵¥tervened >$50bn (>2.5x prev)..
#🇯🇵gov flow impact is inconsequential

¥entervention Round 2: did it ACTUALLY happen?

What’s REALLY behind USDJPY blast↓ on Fri during US hours?

(Thread)
1/
“🇯🇵MOF/BOJ conducted direct unilateral ¥entervention again”
👆
Well - not so fast..

asia.nikkei.com/Business/Marke… 2/Unlike last, been NO official word of ¥tervene from🇯🇵

MOF’s statement:
WE WON'T COMMENT ON WHETHER THERE WAS INTERVENTION OR NOT

“¥tervene 2” reported by Nikkei (“🇯🇵’s WSJ” who btw owns FT- the same FT who said “BOE will delay Gilt sales” ←more on these “fact finders” later)

Intervening on ¥entervention (thread)

USDJPY approaching 147 (147.66←next ‘98 high), & currently 1¥ >level of prev 🇯🇵MOF unilateral ¥tervention USD-blast ↓ on 9/22 (🇯🇵spent $20bn in reserves to buy 13 trading days of time)

This week’s events schedule “intervening” on round 2 1/🇺🇸CPI later today

& just like normal (economically minded private sector) market participants- you dont place a major trade ahead of major policy influencing data drop

But- you sure as hell do talk your book
🇯🇵MOF Suzuki back on “carefully monitoring FX w/ concern”

1/ ¥entervention Announced by 🇯🇵MOF (thread)

First, NO this is not at all “1st ¥ intervention since ‘97-98” as per current headlines- that era was ACTUAL bi/multi-lateral cooperation, w/ then-US Treas Sec Rubin+Tokyo statement to sell USD, executed by Fed & BOJ in coordination 2/ …and that late 90s 🇺🇸🇯🇵 official joint intervention didn’t exactly work either

$¥ dropped -10% 3 days but sharply reversed back days after

But, it DID mark the 146.78 high, a level not seen for decades till.. what would’ve likely been (& will likely shortly be) modern day

Heading into 🇺🇸Fed / 🇯🇵BOJ via

Markets:
🇺🇸USD/🇯🇵JPY
🇺🇸USTs / 🇯🇵JGBs

Against backdrop of
🇺🇸CPI↑
🇯🇵CPI↑ (vs - or ↓)

&

🇯🇵 “yentervention coming!”
🇺🇸 “….”

(thread) 2/ Rates (JGBs)
🇯🇵holiday
Tues BOJ +¥836bn
Wed BOJ +¥250bn
combined across tenors in “unscheduled” buying (5-10Y & 10-25Y), as JGB 20 yield ~1% after worst 20Y JGB auction demand (tail) since ‘87

🇯🇵BOJ conducts “rate check” according to Nikkei

1/ WTF is a rate check?

BOJ talks to mkt participants to “check in” on FX rates - seen as precursor for FX intervene

But WTF is it really?

(Thread)

nikkei.com/article/DGXZQO… 2/
First & foremost - ALWAYS look at where markets are for context

•Since Aug, USDJPY, UST & JGB yields have been 1 direction ↑:
$/¥ 130 → 145
10Y US 2.5% → 3.4%
10Y JP 0.16% → 0.24% (right at 25bp YCC upper cap)

•Tues: 🇺🇸CPI crushes all, incl JGB futs

•Wed: JP10Y 0.25%

Thread of X-Asset Charts eve of (Thurs)🇯🇵BOJ+🇪🇺ECB

Everyone sees ¥↓€↓(& more↓) thru “strong $” lens, but Fed-less blackout period = 🇪🇺vs🇯🇵story

🇪🇺 policy ∆ vs 🇯🇵 no ∆ (expect)

Watch EURJPY & note Kuroda conf (🇯🇵3:30pm) & Nordstream restart ≈ same time

NOTE: MARCH 7th👇 1/ Mar 7 ‘22
EURUSD & EURJPY blew apart from one another in opp directions:
€↑ vs ¥
€↓ vs $

But 3/7 was significant day in 🌎 multi asset markets beyond FX, particularly futures markets on various (& more/less fundamentally unrelated) underliers, which simultaneously💣

🇯🇵 Upper House Election (thread)

Campaign season in full swing ~ Election Day (Jul 10)

Referendum on 🇯🇵 econ policy/macro environ w/ (perceived vs actual, but potential mkts self fulfil/moving) implications on post-Kuroda BOJ

Key issue: Inflation

i.e. THIS time IS diff in🇯🇵 Yes, just to repeat- key issue for Japan voters/candidates this cycle: inflation

Latest Nikkei poll

Voter Priority:
44%: Economy
35%: Pension/Med care
28%: Nat’l Security
👆top 2 basically JGB matters

64%: current CPI↑ (tho lowest of G7) from ¥↓ & commods↑ = “unacceptable”