Interest payments on the national debt hit $1.21 trillion in fiscal year 2025, consuming 17% of total federal spending—more than the entire defense budget.
to each his own I suppose, but what Japan tells me about the government bond yield is that once you stop QE and YCC and start QT, your bond yields will go up. if you overlay those dates (from 2024) it become pretty clear what the major reason for the rise in yields is. Same applies to other yields (esp. EU, US to an extent also but its GRC status makes it more complicated)
The big difference is that when Japan tried to raise rates before, a big deflationary event took place - Asian Financial Crisis, Dot Com bust, GFC. The question I am wondering why it is different this time.
Ok, fair enough, I think that is a more difficult question as those are complex systems which makes it very hard to distinguish specific causes and effects.
This applies to some extent to the bond market also, but here a real megawhale turned from a large source of demand to a source of supply. The net effect of this is so huge that in my eyes it has to take a central place.
Macr) is not really my thing so far as investment process is concerned so I did not really spend any time analysing the data, but a quick LLM query suggests that the net annual effect of BoJ flipping from QE to QT is ¥30-35tn (unless it is a hallucination, perhaps Bloomberg can tell you). This is similar in magnitude to the net annual supply of bonds by the MoF.
The BOJ reduced in balance sheet back in 2006, and JGB yields ripped lower... I think fiscal policy is more dominant than monetary policy for bonds. At the end of the day, its fiscal policy that determines what your capital will look like when returned...
China isn't buying treasuries, but that doesn't mean that they have stopped buying US assets to manage the yuan. That may or may not make a difference to your thesis. It definitely supports your broader thesis the gov't bonds are not the asset into which surpluses are recycled. See Brad Sester's work:
Interest payments on the national debt hit $1.21 trillion in fiscal year 2025, consuming 17% of total federal spending—more than the entire defense budget.
Taxing interest payments to foreigners would be a good start
Can't see how raising JGB interest rates would help with food inflation in Japan. More confused than ever.
Stronger yen would definitely help
to each his own I suppose, but what Japan tells me about the government bond yield is that once you stop QE and YCC and start QT, your bond yields will go up. if you overlay those dates (from 2024) it become pretty clear what the major reason for the rise in yields is. Same applies to other yields (esp. EU, US to an extent also but its GRC status makes it more complicated)
The big difference is that when Japan tried to raise rates before, a big deflationary event took place - Asian Financial Crisis, Dot Com bust, GFC. The question I am wondering why it is different this time.
Ok, fair enough, I think that is a more difficult question as those are complex systems which makes it very hard to distinguish specific causes and effects.
This applies to some extent to the bond market also, but here a real megawhale turned from a large source of demand to a source of supply. The net effect of this is so huge that in my eyes it has to take a central place.
Macr) is not really my thing so far as investment process is concerned so I did not really spend any time analysing the data, but a quick LLM query suggests that the net annual effect of BoJ flipping from QE to QT is ¥30-35tn (unless it is a hallucination, perhaps Bloomberg can tell you). This is similar in magnitude to the net annual supply of bonds by the MoF.
The BOJ reduced in balance sheet back in 2006, and JGB yields ripped lower... I think fiscal policy is more dominant than monetary policy for bonds. At the end of the day, its fiscal policy that determines what your capital will look like when returned...
China isn't buying treasuries, but that doesn't mean that they have stopped buying US assets to manage the yuan. That may or may not make a difference to your thesis. It definitely supports your broader thesis the gov't bonds are not the asset into which surpluses are recycled. See Brad Sester's work:
https://x.com/Brad_Setser/status/2090878909898273027?s=20
Yes. Seen this... maybe they are buying USD or maybe not. Definitely buying gold!