On Tuesday, Japanese government bond yields jumped sharply and rattled global markets. The Nikkei fell 2.5%, the S&P 500 dropped over 2%, Bitcoin slid about 3.3% to $89,300, and gold rose roughly 4% to $4,866 an ounce.
U.S. Treasury Secretary Scott Bessent called the move a six-standard-deviation shock. “I believe the markets are down because the Japanese bond market had a six standard deviation move for the past two days.” said (Ed. note: Six-standard-deviation moves are extremely rare.)
Tim Sun, senior researcher at Hashkey, said the sell-off exceeded expectations and hit broad markets. “The sell-off has clearly exceeded market expectations, evolving into a broad-based shock to global financial markets.”
The shock risks reversing years of ultra-low Japanese rates that supplied cheap global funding. “Japan has two options…tighten monetary policy and reduce global liquidity or do nothing while currency and bond market implode.” tweeted
Sun said the Bank of Japan may intervene to avoid a bond-market collapse by buying bonds. “If the BoJ is forced to engage in de facto money printing to purchase bonds… it is effectively signaling that the central bank has chosen debt solvency at the expense of the value of fiat currency.”
