Yen's Rise and Rising Bond Yields Spark Global Carry Trade Concerns

The Japanese yen has strengthened to ¥154 per dollar, signaling rising market stress and potentially triggering a broader selloff. The rise in JGB yields is a key indicator of this trend, with the 10-year yield reaching 3% for the first time since 1996 and the 30-year yield trading at 4.18%. This shift in Japanese bond yields makes Japanese assets more competitive with overseas holdings, potentially encouraging institutional investors to repatriate capital.

A stronger yen raises the cost of repaying yen-funded positions, while falling USD/JPY reduces the profitability of carry trades. When this happens alongside rising JGB yields, the pressure on leveraged positions builds quickly. The 2024 yen carry-trade unwind coincided with a global selloff, and Bitcoin fell about 11% in dollar terms during that move.