Japan investors snap up U.S. bonds, expecting end of rate hikes (2024)

FAQs

What happens if China dumps US bonds? ›

If China (or any other nation that has a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.

Bond prices move in inverse fashion to interest rates, reflecting an important bond investing consideration known as interest rate risk. If bond yields decline, the value of bonds already on the market move higher. If bond yields rise, existing bonds lose value.

The Japan 10 Years / United States 10 Years Government Bond spread value is -359.7 bp (last update 11 May 2024 2:15 GMT+0).

Key Takeaways. Most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up demand and the price of the bond. Conversely, if interest rates rise, investors will no longer prefer the lower fixed interest rate paid by a bond, resulting in a decline in its price.

So, if the bond market declines or crashes, your investment account will likely feel it in some way. This can be especially concerning for investors with portfolios heavily weighted toward bonds, such as those in or near retirement.

When interest rates rise, bond prices go down in value. Most bonds pay a fixed coupon (i.e. interest payment) and if rates go up, the only way a fixed coupon can equate to a higher interest rate is if the investor pays less for the bond.

The Japan 10 Years Government Bond Yield is expected to be 1.183% by the end of September 2024.

The Japan 3 Months Government Bond has a 0.039% yield (last update 8 May 2024 14:15 GMT+0).

Who owns Japanese bonds? ›

Around 70% of Japanese government bonds are purchased by the Bank of Japan, and much of the remainder is purchased by Japanese banks and trust funds, which largely insulates the prices and yields of such bonds from the effects of the global bond market and reduces their sensitivity to credit rating changes.

As the name implies, JGBs are the bonds issued by the government of Japan, which is responsible for the interest and principal payments.

Japan recorded a Government Debt to GDP of 263.90 percent of the country's Gross Domestic Product in 2022. Government Debt to GDP in Japan averaged 146.28 percent of GDP from 1980 until 2022, reaching an all time high of 263.90 percent of GDP in 2022 and a record low of 50.60 percent of GDP in 1980.

So, if the bond market declines or crashes, your investment account will likely feel it in some way. This can be especially concerning for investors with portfolios heavily weighted toward bonds, such as those in or near retirement.

In February, China remained the second largest holder of US government debt. However, China's holding of US government debt has been below the $1 trillion mark since April 2022. In January 2024, China trimmed holdings of US treasuries by $18.6 billion.

However, CDs and Treasuries are fixed income investments and subject to similar risks as other fixed income investments. For example, if interest rates rise, the price of a CD or Treasury will fall and if you need the investment prior to maturity and have to sell it, you may lose money.

The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.