Global Bond Rout Deepens as JGB Yields Hit a 26-Year High

Market Overview

Last Friday, despite heightened volatility from the largest “triple witching” expiration on record, U.S. equities continued to advance, supported by strong gains in technology stocks. All three major indices posted back-to-back gains. The Nasdaq rose more than 1% for a second consecutive session, lifting the S&P 500 into positive territory for the week, while the Dow Jones Industrial Average recorded its first weekly decline in a month.

Sector-wise, Oracle surged 6.6% on news related to a TikTok agreement, reigniting enthusiasm across AI and semiconductor stocks. AMD jumped more than 6%, while Nvidia climbed nearly 4%. Tesla bucked the broader market with a pullback on the day but still finished the week up nearly 5%. In Europe, the pan-European equity index reached fresh record highs for a second straight session, supported by the European Central Banks upward revision to its economic outlook.

On the macro and rates front, global liquidity conditions experienced sharp turbulence. Following a rate hike by the Bank of Japan, the 10-year Japanese government bond yield breached 2.0% for the first time since 1999. In France, the collapse of budget negotiations triggered a surge in long-dated bond yields. Hawkish remarks from the Federal Reserves third-ranked official accelerated the rebound in U.S. Treasury yields, while the U.S. dollar index posted three consecutive daily gains, reversing earlier weekly losses.

The Japanese yen plunged more than 1% after markets interpreted the BoJs tightening path as “cautious,” marking its worst single-day performance in over two months.

Risk assets staged a broad-based rebound. Gold and silver advanced in tandem, with silver and copper hitting fresh all-time highs. Silver futures rose nearly 4% intraday, extending gains for a fourth consecutive week, while spot gold climbed back toward record levels. Cryptocurrencies rallied across the board, with Bitcoin briefly approaching the $90,000 mark and Ethereum surging more than 7%. Oil prices rebounded for a third straight day, but earlier losses kept weekly performance subdued.

Key Themes Ahead

● Kazuo Ueda: Pace of Policy Adjustment Will Depend on Incoming Data

The Bank of Japan voted unanimously (9–0) to raise rates by 25 basis points, as expected, reiterating that further hikes will follow if economic growth and inflation prospects materialize. Governor Kazuo Ueda stated that adjustments to accommodative policy will be data-dependent, warning that moving too slowly could force the central bank into aggressive tightening later. Emphasizing a “cautious” approach, Uedas remarks weighed on the yen, which fell more than 1% intraday. Traders are now pricing the next rate hike no earlier than September next year.

● French Government Bonds Face Heavy Selling Pressure

French government bonds came under significant selling pressure, with the 30-year yield climbing to as high as 4.525%, the highest level since 2009. The 10-year yield also rose to 3.614%, approaching a nine-month high. The immediate catalyst for the volatility was the breakdown of negotiations over Frances 2026 budget. The French prime minister confirmed that the government would be unable to pass the budget before year-end, putting several new spending initiatives on hold, including €6.5 billion in planned defense expenditures.

Key Event to Watch (GMT+8)

15:00 UK | Final Q3 GDP (YoY)