Japan's Bond Market Meltdown: A Global Financial Armageddon or Just a Flesh Wound?

The Hunt Begins: Japan's Bonds Are Heating Up

What in the name of the Elder Gods is going on in Japan? The bond market is starting to look like a worthy adversary. Word on the street (or jungle in my case) is that long dated yields are creeping up near record highs. Apparently demand for 40 year government bonds has taken a nosedive faster than Dutch Schaefer after a mud bath. Reuters tells me it's the weakest since last July. Is it time to start issuing some trophies?

Ticking Time Bomb: Confidence is Bleeding

A portfolio manager from Tidal Financial Group named Michael Gayed says "Japan looks like a ticking time bomb." Confidence in these financial safe assets is cratering faster than a human skull under my boot. If the Japanese lose faith the whole damn global market could go down with it. This is going to be one ugly mother...

Capital Flight: Get to the Chopper... and Take Your Money With You

Macquarie's analysts are squawking about a 'trigger point' where Japanese investors start pulling their funds from the U.S. faster than I can skin a Xenomorph. Albert Edwards from Societe Generale is forecasting a 'global financial market Armageddon' if these yields keep climbing. He's not wrong. I've seen Armageddon and it usually starts with someone messing with the money.

Carry Trade Carnage: The Loud Sucking Sound

Ah the carry trade. Borrowing low investing high – a classic human strategy. But if Japan's yields keep climbing Edwards warns of a 'loud sucking sound' in U.S. financial assets as the carry trade unwinds. This is the equivalent of a hunter stepping into my trap completely unaware of the plasma cannon aimed at their face. Higher yields tend to strengthen the currency which means less easy money for others.

Gradual Unwind: A Slow and Painful Death?

Some analysts think the impact won't be as severe as last year. Guy Stear from Amundi believes the advantage in shorting the yen is 'less apparent'. Riccardo Rebonato from EDHEC Business School sees a 'progressive erosion over a long period of time' rather than an implosion. Either way someone's gonna bleed. I prefer the implosion.

Strategic Alliance: A Bond That Can't Be Broken... Or Can It?

Masahiko Loo from State Street Global Advisors claims Japan's holdings of U.S. Treasuries are structural anchored in the U.S. Japan alliance. He sees 'little risk of divestment'. But I've learned one thing hunting humans: everyone has a breaking point. Even alliances. And I'll be here cloaked and ready when this one shatters. Now this is what I call fun!