Is a Global Margin Call Coming? How a Bank of Japan Rate Hike Could Trigger the Next Market Shock
The question, John, is the BOJ is currently probably going to raise rates later this month. I think last I saw there was an 80% chance of a hike. Um, it looks like the Fed is going to cut their interest rates. You know, this this strategy, John, was cited as a big reason why tech stocks flew higher this year. Could it work the reverse? Could this blow up and then maybe derail the the stock market run? Yeah, I think uh that is something that we need to be aware of because what we’re really talking about is this could become a giant global margin call. We saw what happened in the margin call with Bitcoin just a few weeks ago. Imagine that on a scale on the global scale, right? I mean, that would be, you know, really a bad um scenario. Now I don’t know if the D boj catalyst would be enough to send this uh you know unwinding of the carry trade but you could have some kind of global uh global events right you know maybe in a heightening of a war or a new war or something I don’t know in that respect I have a friend or old an old currency trader uh who told me that the yen is called the currency of misery Y and what that means is that when there’s uncertainty in the world, when there is risk in the world, in other words, risk to markets that money flows into the yen and so that could be a catalyst for us. So you know underneath this Thomas the what I’m more concerned about is if Japanese treasury or rates go up that makes their treasuries more attractive in the Japan has been one of the is third largest purchaser of US treasuries. So that means then folks might be or traders might be buying yen currency derivatives or assets and not buying US treasuries which would lower our US Treasury prices which raises our rates and a widening of let’s say long-term treasury yields would be a headwind to uh our uh stock market. And that is I think if for for somebody who’s watching at home is that’s what you got to watch for is right does the yen devalue does this rate fall and do we see our long-term treasury yields rise that would be a concern for me. Yeah. Currently US 10ear currently 4.14. It got as high as just about 4.15 John. Right? If we get back above four and a half% that that could be that catalyst that we were afraid of that unwinding
Most investors don’t watch Japanese government bond yields, but they should.
In a new segment from Market on Close, Senior Market Strategist John Rowland, CMT, breaks down why a potential Bank of Japan (BOJ) rate hike could be the most important macro event for global markets — especially for tech stocks like Nvidia (NVDA), Meta Platforms (META), Microsoft (MSFT), and the entire Invesco QQQ Trust (QQQ).
Right now, markets are focused on the Federal Reserve cutting rates. But in the background, Japan — the world’s third-largest holder of U.S. Treasurys — is moving very differently:
➡️ Markets are pricing in an 80% chance of a rate hike this month
➡️ Japanese bond yields are surging in response
➡️ The yen is also rising
This combination could unwind one of the most important, yet least understood, forces behind the stock market rally of the past decade: the yen carry trade. And if it unwinds too fast, it could spark what John calls a “giant global margin call.”
Watch the clip to learn more, and track Treasury rates at Barchart:
https://www.barchart.com/economy/interest-rates
https://www.barchart.com/stocks/quotes/$TNX/overview
https://www.barchart.com/stocks/quotes/JAPRYY10.RT