Global Macro Update: Is Japan Breaking the Bond Market?

— Bond market stress: Global bond markets experiencing significant selloff driven by rising inflation expectations, with Japanese and German yields leading the move. U.S. Treasury yields rising above 4.5% on the 10-year, but showing relative stability through a flattening curve rather than bear steepening.

— Oil shock and inflation driver: War in Iran and Persian Gulf supply chain disruptions pushing crude oil prices higher, creating demand-driven inflation expectations globally. ISM manufacturing prices paid spiking well before recent geopolitical tensions, indicating CapEx-driven demand inflation in the U.S.

— Bitcoin price and technicals: Bitcoin down 27% trailing 12 months but even with S&P 500 over five years (both +79%). Trading near 200-day moving average with declining slope; TBL Liquidity indicator turned green in early April near $70k lows. Bitcoin to Gold ratio at 17x, defending low teens despite gold's strong run.

— U.S. economic strength vs. global risk: Labor market solid with rising initial jobless claims downtrend and job hiring spike (JOLTS data). Atlanta Fed GDP Now at 4% expected growth. Housing rent inflation bottoming signals underlying demand strength. AI/CapEx boom driving nominal growth, making debt service more manageable for the U.S.

— Global financial crisis risk: Potential crisis brewing outside the U.S., not within it. Rising U.S. dollar pressuring non-U.S. debtors forced to service debt in dollars while local revenues stagnate. G7 finance ministers produced no resolution. Corporate credit spreads tight with strong bond demand.

— Liquidity and safe-haven flows: SOFR rates declining toward policy floor, money market fund inflows spiking—signs of flight to safety rather than U.S. financial stress. Treasury market showing demand for short-term safety instruments.

— 12-month trailing returns: Gold +43%, S&P 500 +24%, Treasuries flat, Bitcoin -27%.

— 5-year trailing returns: Bitcoin and S&P 500 both +79%, Gold +144%, Treasuries -24%.

— Bitcoin technicals: Trading at 200-day moving average with negative slope; 200-day MA still declining, preventing classification as bull market despite potential February bottom.

— MVRV ratio (Z-score adjusted): Bitcoin historically low relative to realized price—statistically cheap on this metric.

— Bitcoin-to-Gold ratio: At 17x; defended low teens in 2024–2025 despite gold's rise. Previous low (below 10x) reached in 2023.

— U.S. 10-year Treasury yield: 4.61% (decomposed: 2.5% inflation breakevens, ~2.1% real yield). 30-year yield above 5%. Curve flattening, not steepening.

— Corporate credit spreads: Option-adjusted spreads showing minimal risk; bond deals oversubscribed, indicating strong demand.

— SOFR rate: Declining toward bottom of policy corridor—flight to safety signal, not financial stress.

— Money market fund inflows: Recent spike in weekly open-end fund assets—hideout in cash and safe instruments.

— Dollar: Strengthening on flight to safety and rising U.S. rates; pulling capital into U.S. assets.

— Watch the 10-year Treasury yield carefully. If yields push above 4.75% and the curve begins steepening (bear steepening), the speaker will reassess conviction. A move to 5%+ would likely be "very negative for risk broadly" including stocks. Currently, 4.5% yields are sustainable for equities at all-time highs, but higher levels pose real risk. Monitor weekly for trend changes.

— Use TBL Liquidity indicator for short-term positioning. The indicator provides signals every few weeks to months—more responsive than long-term metrics but not noise-inducing. Green signal since early April near $70k lows has captured Bitcoin's bounce. Access the free headline index at research.thebitcoinlayer.com; full signals available via TBL Pro subscription.

— Global bond crisis risk is real; domestic U.S. risk is lower. Stress is appearing abroad (Japan, Germany, UK), not in U.S. Treasuries. If you hold international assets or have currency exposure, monitor for contagion. Conversely, the U.S. dollar and Treasury positioning remain defensive. The speaker is bullish on U.S. equities relative to rest of world given nominal GDP growth offsetting higher rates.