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Bank of Japan reportedly raises rates to 1.25%, a 31-year high

A post argues that yen-hedged returns of about 2% on a 10-year US Treasury, versus 3% on Japanese government bonds, give Japanese institutions a reason to sell US debt.

The Zeno ReportTZ
1 Source, 20d ago, first seen 20d ago

TLDR

A September 19, 2026 post says the Bank of Japan raised rates to 1.25%, a 31-year high. It says Japanese insurers and pension funds hold over $1 trillion in US Treasuries, mostly hedged back into yen, and argues that rising hedging costs favor a switch to Japanese government bonds. The post also says Japan trimmed its Treasury holdings by roughly $135 billion earlier in 2026 and warns that further BOJ hikes would add pressure on long-term US Treasury yields.

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1 Source, first seen 20d ago

Combined views

11

1 Source, first seen 20d ago

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1 Source

The Zeno Report@ZenoReportThe BOJ rate hike is tightening US Treasury markets: The Bank of Japan just raised rates to 1.25%, a 31-year high. That matters beyond Japan. Japanese insurers and pension funds hold over a trillion dollars in US Treasuries, mostly hedged back into yen. Hedging costs have risen enough that a hedged Japanese buyer now earns only about 2% on a 10-year Treasury, versus 3% on a domestic JGB. That math pushes Japanese institutions to sell US bonds and buy JGBs instead. Japan already trimmed roughly $135 billion in Treasury holdings earlier this year. More BOJ hikes make that trade worse, and the selling pressure on US long yields grows.20d
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    Bank of Japan

    1 Source

    The Zeno Report@ZenoReportThe BOJ rate hike is tightening US Treasury markets: The Bank of Japan just raised rates to 1.25%, a 31-year high. That matters beyond Japan. Japanese insurers and pension funds hold over a trillion dollars in US Treasuries, mostly hedged back into yen. Hedging costs have risen enough that a hedged Japanese buyer now earns only about 2% on a 10-year Treasury, versus 3% on a domestic JGB. That math pushes Japanese institutions to sell US bonds and buy JGBs instead. Japan already trimmed roughly $135 billion in Treasury holdings earlier this year. More BOJ hikes make that trade worse, and the selling pressure on US long yields grows.20d
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