Japanese Bond Risk Spills Into Global Markets
Subscriber Update Jan20 2026
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Ok on to the markets where trouble has been brewing for some time as the global monetary system readjusts to the ongoing “real money” discounting of overzealous global central bank money debt printers. We often wondered when the cliff would come or wondered how far the can could be kicked down the road. Well one look at real money (Gold and Silver) and the answer becomes pretty clear. We will look at those charts in a bit, but let’s look at the Japanese bond markets for the real catalyst in yesterdays vol spike.
This structural shift in the Japanese bond market has been a very long time in the making and its something that will be very difficult for the BOJ to manage. Their debt to GDP ratio is massive and we believe this will play itself out over the next few years and will have major repercussions on global markets:
Some points to consider:
Benchmark 10y JGB yields surged to around 2.3–2.38% (highest since the late 1990s)
30y JGB yields near or above 3.9-4% (record highs) and 40y yields move above 4.2% (first time ever for any JGB maturity crossing 4% in over 30 years, and highest since the 40y bond’s debut in 2007).
Talk about volatility, 30–40 bps jumps in single sessions or over a few days for ultra-long bonds, the sharpest in years.
Why is this happening? The main drivers are fiscal and political concerns under new Prime Minister Takaichi:
Proposals for major tax cuts
This would widen Japan’s already massive budget deficits and push debt-to-GDP (over 200%, one of the world’s highest) even higher, requiring more bond issuance. As we showed from the debt to GDP chart above
Investors are fleeing or demanding higher yields to compensate for perceived fiscal risk and inflation pressures (Japan has moved away from deflation, with persistent price rises).
The BOJ has been gradually scaling back its massive bond purchases (it owns over half of outstanding JGBs) and normalizing policy (This is in stark contrast to their decades long negative real interest rate policy)
Why does this tend to have global market repercussions?
Global bond market interconnectedness: The JGB rout has pushed up yields in the US (10y Treasuries near 4.285%, 30y breaching 4.9%), Germany, UK, Canada, and elsewhere. Global investors re-price “term premia” (extra yield for long-term risk) when one major debt market signals fiscal stress.
Carry trade unwind pressure: For years, investors borrowed cheaply in low-yield yen to invest in higher-yielding assets abroad (e.g., US Treasuries, stocks). Higher JGB yields make yen funding less attractive causing a potential unwinding of these leveraged positions, leading to selling pressure on global assets and higher volatility.
Reduced Japanese demand for foreign bonds: Japanese institutions (big buyers of US/European debt for yield) may repatriate funds or buy less abroad now that domestic yields are more competitive.
Broader risk sentiment: Sharp rises in any major bond market signal eroding trust in sovereign debt globally (especially in high-debt countries like the US). This can raise borrowing costs everywhere, pressure equities (higher discount rates hurt stock valuations), and interact with other 2026 factors like US tariff threats or geopolitical tensions. We see this as a structural monetary shift that will continue to play out over the next decade. This is why we believe in the power of education especially upon the global monetary system and how it actual works.
Magnelibra believes we are on the precipice of a “new monetary system” one by which centralized powers will be diminished and a more decentralized digital system will be deployed. We believe the debt fiat system is inherently flawed and that the future of money will not be driven by debt, but by actual hard money and real utility value derived from the output generated by the global work place. This is not something to be scared of, but rather something to be beholden and embraced. For far too long debt has been the mechanism by which we create value and that system is what is being systematically repriced.
Ok let’s take a look at a few charts specifically Gold and Silver as well as our usual QQQ ETF (our main tech proxy) and of course the SP500 and Nasdaq future:
Looking at Feb Gold, well there is really no upside limit, only buy zones now!
Same thing for March Silver:
This week we suspect support initially to come at the 21pSMA at 609. Our resistance and resell point or put buying points is up at 623. Triangle wedge seems to be in place here but the QQQ is sitting smack in between our longer term trend channel:
One of the key market sentiment charts we look at is the SP500 vs the Nasdaq futures contract spread chart. The Nasdaq has outperformed since Dec. 2022 and momentum has stalled out, which for us, may indicate an overall structural shift to diversify out of tech names and into the broader market, or simply just take a more hedged position vs all overall long equity biases. We have not yet had a confirm of this move, and even this week the first test of the -$160k level was thwarted once again:
So keep an eye out here, we expect a back and forth but structurally the imbalances seem to be proving too much and with the moves in gold and silver, well let’s just say the writing is on the wall!
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