Japan's French Bond Sell-Off Sparks Concerns for Crypto Market

A French bond crisis is unfolding as Japan's investors dump their holdings in French government bonds. The situation has sparked concerns that it may impact Bitcoin and other cryptocurrencies.

Japan's Sumitomo Mitsui DS Asset Management, led by Shinji Kunibe, sold all its French government bonds due to worries about France's finances. Paris owes about 119% of its yearly economic output, with a 10-year borrowing rate touching 4.96% last week, the highest since 2002.

Kunibe's funds invested in German bonds and short-term Japanese debt instead. The size of the sale was not disclosed. Commodity expert Stern Drew suggests that Japan may have broken the French bond market, but France has not run out of buyers, as it sold about €12 billion of long-term bonds on October 1, with bids coming in at roughly twice that.

The Japanese Ministry of Finance releases weekly trading data on Thursday, which will reveal whether Japan was alone in dumping its French government bond holdings. In the past, Japanese investors have used cheap yen to buy higher-paying assets abroad, but this strategy may be threatened by the recent strengthening of the yen.