The writing’s on the wall. You just have to be able to read Japanese.
If you’re immersed in the macro-market narrative, one of the biggest questions on your mind is whether foreign sponsorship of the US long-end’s in retreat.
If it is, there are any number of plausible explanations, running the gamut from the overtly political (e.g., “Mr. Trump, you have this backwards. It’s not ‘Buy our bonds or we won’t protect you,’ it’s ‘Protect us or we won’t buy your bonds'”) to the strictly fiscal (e.g., “Even if your deficits are meaningless, the optics around them are very bad, and therefore we want more compensation to fund them”).
Analysts and strategists are hard at work searching for evidence of waning demand for US Treasurys, and if you ask Deutsche Bank’s George Saravelos, the disparity highlighted in the figure below’s telling.
For the uninitiated, the relationship between the yen and US yields is among the more important indicators in markets, and when it’s out of whack, people tend to stand up and take notice.
“A widening gap between US Treasury yields and USDJPY [is] the single most important market indicator of accelerating US fiscal risks,” Saravelos wrote Wednesday, calling a stronger yen in the face of better compensation on offer from benchmark US debt “evidence that foreign participation in the US Treasury market is declining.”
You might fairly point to higher yields in Japan to argue that fiscal risks are surfacing there too, but Saravelos doesn’t buy it. “If this was the case, the yen would be weakening,” he went on, in the same note, adding that if anything, the JGB selloff’s just another headache for US Treasurys in that it “mak[es] Japanese assets an attractive alternative for local investors,” thereby “encourag[ing] further divestment from the US.”
It appears this timely note came before the 20y auction, as if to put a “!” on the afternoon.
Yeah but honestly, that 20-year sale wasn’t really that bad. And that’s what made the subsequent bearish price action even more disturbing. Here: https://heisenbergreport.com/2025/05/21/well-hello-liz/
Rep. Brendan Boyle just announced that according to the CBO, the big, beautiful bill that will be voted on in the House contains $535 billion cuts to Medicare.TO MEDICARE. That’s MediCARE, folks. Not MediCAID.
That’s mom and dad, grampy and meemaw, Uncle Fud and Aunt Babs, basically all of the old folks YOU know.
It’s easy to sell cuts to MediCAID to the conservative crowd, who reflexively look at poor people as grist for their favorite economic fantasies. But $535 billion in cuts to Medicare? You are messing with your heartbeat on that one. Or you should be.