The FAILED Bailout of Japan JUST got Worse: Treasury LASHES OUT
Overall Thesis
The US Treasury's intervention in the Japanese yen has failed, with the yen weakening back through critical levels and Treasury yields rising to multi-year highs, signaling potential recession risks and market instability.
Narratives
Kevin states the 30-year Treasury yield is sitting at 19-year highs, citing it as part of the broader evidence of Treasury market stress amid failed intervention efforts. No forward-looking target was given.
Key Arguments
- 30-year yield at 19-year highs
Kevin notes the 10-year Treasury yield has risen to 4.73%, near year-to-date and multi-year highs, which he frames as evidence that the Treasury's yen intervention and broader market management is failing. He does not give a forward price/yield target, just describes current elevated levels as a symptom of policy failure.
Key Arguments
- 10-year yield at 4.73%, near highs for the year and three-year highs
- Rising yields tied to failed Treasury intervention and credibility concerns
Kevin highlights a sharp move higher in the 2-year Treasury yield today, producing a 'bear flattening' of the yield curve, which he says signals rising recession risk. This is presented as a current market observation rather than a specific forward prediction.
Key Arguments
- 2-year yield skyrocketed today
- Bear flattening described as a recessionary warning signal
Kevin argues the US Treasury's intervention to strengthen the yen (selling euro assets to buy yen) has already failed, with USD/JPY back above the 160 level that had been feared as a carry-trade unwind trigger. He believes yen interventions historically always reverse because they bandage rather than fix underlying fundamentals, implying continued yen weakness ahead.
Key Arguments
- USD/JPY briefly dropped to ~155 and settled near 157 after intervention, but has already moved back through 160
- Every historical BoJ/Treasury intervention into the yen has eventually reversed and yen has continued weakening
- Underlying fundamentals (inflation/growth divergence between Fed and BoJ) are not being addressed, only masked
- Risk of a disorderly Japanese carry trade unwind if BoJ hikes aggressively while Fed holds rates
Predictions (1)
Hedges & Caveats
- Discussion focuses on potential risks of Japanese carry trade unwinding
- Acknowledges political motivations behind Fed policy decisions
- Notes that market disruptions could negatively impact asset values
- References past market events (August 2024) as cautionary examples