Global Bond Market Enters Bear Phase Amid Rising Yields and Debasement Fears

The global bond market has entered a bear phase, with long-term yields reaching their highest levels since the 2008 financial crisis. Japan's 10-year government bond yield surged to 3% for the first time since 1996 on Tuesday, while the 30-year JGB yield topped a record 4.18%. The 10-year US bond yield also jumped to a new multi-year high and stands at 4.78%.

The Treasury Secretary Scott Bessent's announcement of increasing the maximum size of debt buyback transactions to $4 billion from September has been seen as a form of yield curve control by some commentators. This has brought the debasement narrative back into the spotlight, which is closely followed by Bitcoin and precious metal investors.

Industry commentator Arthur Hayes has argued that the Fed will eventually use its Foreign and International Monetary Authorities (FIMA) repo facility to create new dollar liquidity. Through this swap line, Japan's Finance ministry could borrow dollars against its Treasury holdings and sell them for yen, strengthening the currency without causing an imminent sovereign bond crisis.