Japan Bond Sales Raise Concerns as France Faces Market Turmoil

A Japanese fund has sold all its French government bonds amid a growing bond crisis in France. Shinji Kunibe, who manages the global bond team at Sumitomo Mitsui DS Asset Management, moved the funds into German bonds and short-term Japanese debt. The sale was driven by concerns over France's finances, with Paris owing about 119% of its yearly economic output and its 10-year borrowing rate hitting 4.96% last week, the highest since 2002.

Stern Drew, a commodities expert, suggested that Japan may have broken the French bond market by withdrawing its support. Despite this, France managed to sell about 12 billion euros of long-term bonds on October 1, with bids coming in at roughly twice that amount. On October 8, Japan's Ministry of Finance will release weekly trading data that may reveal more about the situation.

The data, which tracks Japan's biggest banks, insurers, and funds, will be released at 8:50 a.m. Tokyo time. The last report showed significant selling, with Japanese investors dumping a net 684.5 billion yen ($4.3 billion) of foreign bonds the previous week. Bitcoin and Ethereum traders are also watching Japan closely, as past yen shocks have impacted cryptocurrency markets.

In September, the yen strengthened 3.7% in days, but Bitcoin held above $79,000. On Sunday, Bitcoin traded at $85,363, up 0.46% in 24 hours. The yen carry trade, where investors borrow cheap yen to buy higher-paying assets abroad, has been a significant factor in recent market movements. The Bank for International Settlements estimated these trades at about $250 billion before the August 2024 crash.