Japanese Bonds Tumble as Yields Hit Record Highs

Posted on January 20, 2026 by Ignacio Teson

The sell-off in Japanese government debt accelerated after investors reacted negatively to the government’s fiscal proposal, amid growing unease over its potential spillover effects on global markets.

Japan's Bonds are reaching new lows. — Japan’s Bonds are reaching new lows.

Japan’s bond market came under renewed pressure on Tuesday. Sovereign bonds extended their slump, pushing yields to levels not seen in more than three decades, as investors rejected Prime Minister Sanae Takaichi’s campaign proposal to cut taxes on food without a clearly identified funding source.

According to Bloomberg, the yield on Japan’s 40-year government bond climbed above 4%, a record high since its launch in 2007 and the highest level for any maturity of Japanese sovereign debt since the early 1990s. Yields on 30- and 40-year bonds jumped more than 25 basis points on the day—the sharpest rise since April last year, when former U.S. president Donald Trump’s tariff offensive rattled global markets.

Fiscal Concerns and Market Distrust

The sell-off was reinforced by a weak auction of 20-year bonds, which once again highlighted investor concerns over public spending and inflation. At the same time, the wave of selling in Japanese debt spilled over into global markets, amplifying declines in U.S. Treasuries, which were already under pressure amid fears that new tariffs could undermine the appeal of U.S. assets.

Since Takaichi took office in October, yields on 20- and 40-year bonds have risen by roughly 80 basis points, as investors closely monitor Japan’s potential impact on global markets in an environment of heightened volatility ahead of the snap election scheduled for February 8. With no clear funding source for the proposed consumption tax cut, markets expect it to be financed through additional debt issuance.

“The bond market is the canary in the coal mine,” one investor noted. “Despite the reaction, there has been no official communication to counter it. From an investor’s perspective, it’s hard to find incentives to buy bonds.”

Regime Shift and Global Implications

The surge in yields underscores a structural shift in Japan’s bond market after years of ultra-low rates. The 30-year Japanese government bond now yields more than its German counterpart, which is trading around 3.5%. For some asset managers, however, these levels are beginning to look attractive.

“A 40-year bond yielding above 4% offers increasing value for long-term investors, especially on a currency-hedged basis,” some managers argue.

Rising yields have also drawn in foreign capital, which now accounts for nearly 65% of monthly trading volume in Japan’s bond market. At the same time, the yen weakened to 158.60 per dollar, while Japanese equities moved in line with broader declines across Asian markets.

Risk of Bank of Japan Intervention

Negative sentiment deepened after data showed that domestic insurers sold a record amount of ultra-long bonds in December—the largest net liquidation since records began in 2004. Although Japan’s debt-to-GDP ratio has fallen to a 16-year low, it remains the highest among advanced economies, making demand particularly sensitive to any signs of increased borrowing.

Against this backdrop, some market participants warn that if pressure persists, the Bank of Japan may be forced to step in to stabilize the market. Should the sell-off intensify and spread globally, the central bank could revive its unlimited bond-buying tools to stem the decline.

Europe to Use Anti-Coercion Tool Against U.S. Over Greenland

Posted on January 20, 2026 by Ignacio Teson

Created in 2021, the instrument allows Europe to condition trade with the United States, although it can take months to take effect.

Amid repeated threats by U.S. President Donald Trump to take control of Greenland, calls are growing for the European Union to deploy its so-called Anti-Coercion Instrument.

Tensions escalated after Trump announced tariffs of up to 25% on Denmark, Finland, France, Germany, the Netherlands, and Sweden—along with non-EU countries the United Kingdom and Norway—unless the autonomous Danish territory of Greenland is ceded to the United States.

The instrument is designed to deter economic coercion against any of the EU’s 27 member states. Such coercion is defined as the “application or threat of application by a third country of measures affecting trade or investment” that interfere with the bloc’s and its members’ “legitimate sovereign decisions.”

Political figures including French President Emmanuel Macron and Valérie Hayer, leader of the liberal Renew group in the European Parliament, have urged the EU to activate the mechanism. “The United States is making a miscalculation that is not only dangerous, but could also be painful. The Anti-Coercion Instrument is our economic nuclear weapon,” Hayer said.

How the EU’s Anti-Coercion Instrument Works

The tool allows the EU to impose measures such as restrictions on imports and exports of goods and services within its single market of 450 million consumers. It also gives Brussels the authority to limit U.S. companies’ access to public procurement contracts across Europe.

EU officials have previously drawn up a list of U.S. services that could be targeted, potentially including major American technology firms, given that the United States runs a services trade surplus with the EU.

Both the European Commission and member states can request activation of the instrument. Approval would require the backing of at least 55% of member states, representing 65% of the EU’s population. Even then, implementation could take several months.

The Commission has up to four months to investigate the third country accused of harmful trade practices. Member states would then have eight to ten weeks to endorse any proposed response. Only after that would the Commission be authorized to prepare measures, which could enter into force roughly six months later.

The Anti-Coercion Instrument was created after Lithuania accused China in 2021 of blocking its exports in retaliation for Vilnius allowing the opening of a Taiwanese diplomatic representation in the country.

Wall Street Slides as Risk Aversion Spikes and Gold and Silver Soar

Posted on January 20, 2026 by Ignacio Teson

Donald Trump’s tariff threats against Europe revive fears of a trade war, hit Wall Street, and fuel a sharp rise in risk aversion.

Stocks are looking bearish right now after two days of declines.

Wall Street posted steep losses on Tuesday, January 20, following Monday’s Martin Luther King Jr. Day holiday, as markets reacted to rising risk aversion triggered by Donald Trump’s remarks on imposing tariffs on Europe and the escalating dispute over Greenland. The exchange of statements between U.S. and European officials has continued to weigh on sentiment, pushing markets lower.

U.S. equities traded sharply down across the board, led by the Nasdaq, which fell 1.6% to 23,096.42. The S&P 500 slid 1.4% to 6,841.97, while the Dow Jones posted a more moderate decline of 1.2%, ending at 48,723.52.

[[SPX-graph]]

Macro Context

The U.S. president warned that tariffs of 10% would be imposed starting February 1—rising to 25% from June 1—on imports from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, unless an agreement is reached for the full acquisition of Greenland. He also threatened to levy 200% tariffs on French wine and champagne if President Emmanuel Macron refuses to join the so-called “Peace Board” proposed by Washington for Gaza.

The European Union responded swiftly. Brussels rejected any form of intimidation and, while emphasizing dialogue and diplomacy, made clear that all options remain on the table. These include activating the Anti-Coercion Instrument, which would allow trade restrictions and limits on access to the single market, as well as reviving a €93 billion retaliation package designed during previous disputes with the United States.

From the financial sector, the prevailing mood is one of growing distrust. Confusion and unpredictability best describe the current market environment following Trump’s latest moves.

Adding to the pressure is mounting institutional uncertainty in the United States. Investors are closely watching an upcoming Supreme Court ruling on the legality of using emergency powers to impose broad tariffs—a decision that could spark significant volatility. In addition, a hearing is scheduled for Wednesday on the dismissal of Federal Reserve Governor Lisa Cook, ordered by Trump, amid heightened tensions between the White House and the central bank.

Gold Hits New Highs, Oil Rises

Rising risk aversion is clearly reflected across other markets. Gold, the classic safe-haven asset, surged to fresh record highs, breaking above $4,700 per ounce for the first time, with gains exceeding 3% on the day. Silver also hit a new record, jumping nearly 7% to around $94.72 per ounce.

In energy markets, crude prices moved higher: WTI gained 1.3% to $60.15 per barrel, while Brent rose 1.4% to $64.85, tracking the broader increase in global market tensions.

[[XAU/USD-graph]]

Japan: Sharp Rise in Bond Yields

In Japan, the yield on the 40-year government bond climbed above 4% for the first time since its launch in 2007, following Prime Minister Sanae Takaichi’s announcement of snap elections scheduled for February 8. The yield on the ultra-long bond jumped 27.5 basis points to 4.215%, while the 30-year yield rose to 3.88%, reflecting growing concerns over Japan’s fragile fiscal position and the government’s ambitious spending plans.

Donald Trump’s Assault on the Fed Reaches the U.S. Supreme Court

Posted on January 20, 2026 by Ignacio Teson

The presence of the Federal Reserve chair at a key Supreme Court hearing underscores the severity of the standoff with the White House and the risk of setting a precedent on political control over monetary policy.

Federal Reserve Board of Governors member Lisa Cook, right, talks with Federal Reserve Chairman Jerome Powell before an open meeting of the Board of Governors at the Federal Reserve, Wednesday, June 25, 2025, in Washington. (AP Photo/Mark Schiefelbein)/DCMS106/25176724591192//2506252241

Federal Reserve Chair Jerome Powell’s decision to attend oral arguments at the U.S. Supreme Court this Wednesday has raised alarm bells across markets and institutional circles. Such a move is highly unusual and highlights the importance of the case, as well as the potential impact its outcome could have on the central bank’s independence.

The legal dispute centers on President Donald Trump’s attempt to remove Fed Governor Lisa Cook, a move that has reignited a broader debate over the limits of presidential power and the safeguards protecting monetary policy autonomy. Powell’s personal presence at the hearing is widely seen as a signal of how seriously the institution views the risks posed by the litigation.

The case is further complicated by the fact that it unfolds while Powell himself is facing a criminal investigation in Washington related to the multibillion-dollar renovation of the Fed’s headquarters and his testimony before Congress. In a public statement issued on January 11, the Fed chair directly linked the conflict to monetary policy decisions, arguing that the threat of criminal charges arose “as a consequence of the Federal Reserve setting interest rates based on what it believes is best for the public, rather than the president’s preferences.”

Lisa Cook’s Lawsuit

Trump announced in late August his intention to remove Cook, citing alleged mortgage fraud involving two properties. The Fed governor has denied any wrongdoing and faces no criminal charges. In response, she filed a federal lawsuit seeking to block her dismissal, and both a district court judge and a federal appeals court ordered that she remain in office while the case proceeds.

The Department of Justice has challenged those rulings, calling them an “improper judicial interference” with the president’s authority to remove officials for “cause.” For the Federal Reserve, however, the case goes well beyond Cook’s individual situation and could establish a critical precedent defining the extent of institutional protection shielding the central bank from political pressure.

Tensions Escalate Between the U.S. and Europe: Stocks Fall, Gold Rises

Posted on January 19, 2026 by Ignacio Teson

European stocks slide as trade tensions between the United States and the European Union intensify, while precious metals hit record highs and oil and the dollar weaken.

With Wall Street closed for the Martin Luther King Jr. Day holiday, European equities are trading lower on Monday, January 19, with losses of up to 1.6%, amid rising trade and geopolitical tensions.

The Euro Stoxx 50 fell 1.5%, led by Paris (-1.7%) and Milan (-1.2%), as increased risk aversion weighed on investor sentiment.

[[DAX-graph]]

Market caution intensified after Donald Trump warned of potential new tariffs on countries opposing his plan to move forward with the acquisition of Greenland, a statement that reignited concerns across global markets.

Over the weekend, Trump said the United States would impose an additional 10% tariff starting February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom.

He added that tariffs could rise to 25% in June if no agreement is reached allowing the U.S. to gain control of Greenland, a semi-autonomous territory within the Kingdom of Denmark.

European Retaliation to Trump

Media reports suggest the European Union could revive a €93 billion tariff package on U.S. goods in retaliation, a move that would significantly escalate tensions and raise the risk of a broader transatlantic trade dispute.

In Asia, markets were mixed. Japan’s Nikkei fell 0.7% on profit-taking and U.S. tariff threats, South Korea’s Kospi rose 1.3%, Shanghai’s benchmark index gained 0.29%, while Hong Kong’s Hang Seng was down 1.06% ahead of the close.

Following Trump’s tariff threats linked to potential U.S. moves on Greenland, affected European countries began to respond. EU officials are reportedly considering invalidating the trade agreement reached with Washington last July and have also warned about the possible activation of the bloc’s anti-coercion instrument, a mechanism designed to counter economic pressure from third countries.

Precious Metals Hit Record Highs

Amid rising geopolitical tensions, precious metals continue to strengthen as safe-haven assets. Both gold and silver reached record highs. Spot gold climbed 1.6% on Monday to $4,669.57.

Brent crude, the European benchmark, traded nearly flat at $64.11 per barrel, while U.S. benchmark West Texas Intermediate (WTI) stood at $59.34.

The U.S. dollar also weakened on Monday, slipping 0.2% to 99.050.

China Weathers the Tariff War as Its Economy Grows 5% in 2025

Posted on January 19, 2026 by Ignacio Teson

Exports to new markets proved key, though growth slowed in the final quarter of last year.

China reported on Monday that its gross domestic product (GDP) expanded by 5% in 2025, according to data from the National Bureau of Statistics (NBS), matching the previous year’s pace and meeting official growth targets despite the tariff war with the United States.

However, growth slowed to 4.5% in the final quarter of the year, the government said. That marked the weakest quarterly expansion since late 2022, when China began easing its strict Covid-19 restrictions. The world’s second-largest economy had grown at an annual rate of 4.8% in the previous quarter.

Both figures came in above analysts’ expectations, which had forecast quarterly growth of around 1% and annual growth of roughly 4.4%.

Chinese leaders have sought to accelerate growth following the downturn in the property market and the disruptions caused by the pandemic, which rippled across the broader economy.

As expected, full-year growth aligned with the government’s official target of “around 5%.”

Chinese Exports and Imports

Strong exports helped offset weak consumer spending and subdued business investment, contributing to a record trade surplus of $1.2 trillion.

Exports to the United States suffered after President Donald Trump returned to office early last year and reignited a tariff war. That decline, however, was largely offset by increased shipments to other markets. Rising imports of Chinese goods through platforms such as Temu and Shein have prompted some governments to take steps to protect domestic industries.

Trump and Chinese leader Xi Jinping agreed to extend a truce in their tariff dispute, which also helped ease pressure on China’s exports. Even so, Chinese exports to the U.S. fell by 20% last year.

The NBS noted that, “in the face of complex changes in the domestic and global economic environment”—a veiled reference to tariffs—“the national economy advanced through high-quality development driven by innovation despite mounting economic pressures.”

“The economy maintained momentum toward steady progress in 2025 despite multiple headwinds,” the statement added.

What Chinese Authorities are Doing

Chinese policymakers have repeatedly emphasized boosting domestic demand as a priority, but results so far have been limited. A trade-in program encouraging drivers to replace older vehicles with more energy-efficient models, for example, has lost momentum in recent months. Stabilizing—rather than fully recovering—the domestic property market remains key to restoring public confidence and, in turn, reviving household consumption and private investment.

China has also rolled out trade-in subsidies for household appliances such as refrigerators, washing machines, and televisions. While major consumer stimulus measures in 2025, including these subsidies, are set to continue into 2026, they could be scaled back, said Weiheng Chen, global investment strategist at J.P. Morgan Private Bank, in a recent note.

Looking ahead, slower growth is expected in 2026. Deutsche Bank forecasts China’s economy will expand by around 4.5% next year, according to the Associated Press.

Bitcoin’s Weakness Sparks Bargain Buying and Millionaires Place Bets

Posted on January 19, 2026 by Ignacio Teson

Both traders and family offices, as well as hedge fund managers, reassessed allocation models amid lower Bitcoin price levels.

Bitcoin is at an important crossroads and could shift in either direction sharply.

Bitcoin is going through a period of heightened volatility, combining sharp corrections with renewed signs of buying interest from institutional investors and prominent industry figures who view price declines as an opportunity to position for the very long term.

In recent days, the digital asset’s price fell below $92,000, pressured by macroeconomic concerns and rising global risk aversion. This triggered sell-offs across the crypto market and significantly reduced the market capitalization of assets such as Ether and Solana.

[[BTC/USD-graph]]

Rather than deterring all major players, this price weakness encouraged strategic buying by institutional investors and high-net-worth individuals with long-term convictions.

Traders, family offices, and hedge fund managers have been reevaluating allocation models at lower Bitcoin levels, viewing the pullback as an opportunity to accumulate a scarce asset.

Michael Saylor Steps In to Buy Bitcoin

One of the most visible examples is Strategy, the company formerly known as MicroStrategy and led by Michael Saylor, which continues to treat Bitcoin as its primary reserve asset.

Despite the price decline and pressure on its own stock, the company kept accumulating large amounts of Bitcoin and recently executed a purchase of more than $1.25 billion, acquiring roughly 13,627 BTC in a single weekend.

Saylor also sent signals on social media, including a post featuring the phrase “Bigger Orange,” which the market interpreted as a hint of additional purchases, reigniting optimism among investors.

These messages come as Strategy’s Bitcoin holdings approach 700,000 BTC—equivalent to more than 3% of the total supply.

Market Follows Suit

Corporate buying is not the only source of demand. The recent price pullback also triggered tactical purchases by wealthy investors and long-term capital, which see limited-supply assets experiencing temporary declines as offering attractive multi-year return potential.

Some analysts compare the current correction to previous Bitcoin cycles, in which deep pullbacks were followed by strong rebounds during classic bull phases.

In traditional institutional markets, renewed capital inflows have also been observed through regulated products such as spot Bitcoin ETFs. These vehicles recorded their largest net inflows in weeks, signaling that long-only allocators are returning after a period of caution.

Spot Bitcoin ETFs posted net inflows of $1.42 billion over the past week—the strongest weekly performance since early October—amid a resurgence in institutional demand.

According to data from SoSoValue, capital inflows were concentrated midweek. Wednesday stood out as the strongest session, with net inflows close to $844 million, while Tuesday recorded an additional $754 million.

NYSE Moves Toward 24/7 Trading With Tokenized Equities

Posted on January 19, 2026 by Ignacio Teson

The initiative is part of ICE’s digital strategy to modernize market infrastructure and enable continuous, blockchain-based trading.

The New York Stock Exchange (NYSE) announced the development of a platform for the on-chain trading and settlement of tokenized securities, a key step in bridging traditional financial markets with blockchain-based infrastructure. The project, which is still subject to regulatory approval, would enable 24/7 trading of tokenized equities, with near-instant settlement and funding via stablecoins.

The initiative is part of the digital strategy of Intercontinental Exchange (ICE), the NYSE’s parent company, and aims to modernize market infrastructure to better align with an increasingly digital and global financial environment.

According to the group, the new platform will combine the NYSE’s Pillar order-matching engine with blockchain-based post-trade systems capable of operating across multiple networks for asset settlement and custody.

How the Platform Would Work

If approved by regulators, the project would give rise to a new NYSE market allowing the trading of both tokenized versions of traditionally issued securities and securities natively issued in digital form. The exchange emphasized that investors holding tokenized shares would retain the same economic and governance rights as conventional shareholders, including dividend payments and voting rights. Market access will be non-discriminatory and open to all authorized broker-dealers, in line with longstanding market structure principles.

One of the platform’s key differentiators will be the ability to trade around the clock, seven days a week, with virtually instant settlement and orders denominated directly in U.S. dollar amounts—an approach designed to reduce operational frictions and costs associated with traditional processes.

Another Step in ICE’s Digital Strategy

The launch of the tokenized securities platform is part of a broader ICE initiative to adapt its clearing infrastructure to a continuous trading model. In this context, the group is already working with banks such as BNY and Citi to enable tokenized deposits within its clearinghouses.

The goal is to allow clearing members to transfer and manage funds outside traditional banking hours, meet margin requirements, and address financing needs across different jurisdictions and time zones.

“For more than two centuries, the NYSE has transformed the way markets operate. Now we are leading the way toward fully on-chain solutions, combining trust, high regulatory standards, and cutting-edge technology,” said Lynn Martin, President of NYSE Group.

ICE executives stressed that securities tokenization is central to the company’s long-term vision. “Supporting tokenized securities is a critical step toward operating market infrastructure on-chain for trading, settlement, custody, and capital formation in the new era of global finance,” said Michael Blaugrund, Vice President of Strategic Initiatives at ICE.

Mexican Peso Ends Flat Against the Dollar, Posts 1.91% Weekly Gain

Posted on January 17, 2026 by Ignacio Teson

The local currency edged slightly lower after appreciating yesterday to levels not seen in a year and a half, but still closed the week with a strong positive move.

The Mexican peso finished Friday’s session virtually unchanged against the U.S. dollar. After strengthening the previous day to its strongest level in 18 months, the currency gave back marginal ground but ended the week with solid gains.

The exchange rate closed at 17.6465 pesos per dollar. Compared with Thursday’s close of 17.6499, according to official data from Banco de México (Banxico), this represented a marginal loss of 0.02%, less than one cent.

[[USD/MXN-graph]]

During the session, the dollar traded within a range of a high of 17.7323 pesos and a low of 17.6284. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against six major currencies, rose 0.01% to 99.36 points. The exchange rate stabilized with a slightly bullish bias despite a weaker dollar, reflecting reduced expectations for cuts to the Federal Reserve’s target range for the federal funds rate.

Fed pause expected

According to the FedWatch tool, which tracks federal funds futures, traders expect the Fed’s key interest rate to remain in the 3.50%–3.75% range following its first policy meeting of the year on January 28.

The Federal Reserve cut interest rates by 25 basis points in each of its last three meetings, but analysts have begun to anticipate a pause amid persistent inflationary pressures and signs of stability in the labor market.

Earlier, the U.S. central bank reported that manufacturing activity unexpectedly increased in December, supported by a rise in primary metals production that offset declines in motor vehicle plants.

In addition to economic data, markets closely followed public remarks from Federal Reserve officials, including Susan Collins, president of the Boston Fed; Fed Governor Michelle Bowman; and Vice Chair Philip Jefferson.

Strong weekly performance

Despite fading expectations for Fed rate cuts, the peso continued to appreciate. Compared with last week’s close of 17.9836 pesos per dollar, the move represents a gain of 33.77 cents, or 1.91%, over the week.

U.S. and Taiwan Strike Deal on Tariffs and AI Chips

Posted on January 17, 2026 by Ignacio Teson

The Asian island is a global leader in this sector, and the United States is now seeking to integrate part of its production in order to achieve self-sufficiency.

Tesla is making a major investment into AI chips from Samsung.

Taiwan has reached an agreement with the United States that will reduce tariffs on its artificial intelligence (AI) chips and increase investment in U.S. territory. Through this deal, Washington secures a key ally in the production of these technologies, which currently dominate discussions among global investors.

How Taiwn is Dealing with Politics

The Asian island—one of the world’s largest chip producers—has long been described as a “Silicon Shield,” as its strategic importance incentivizes the United States to protect this democratic territory from a potential invasion or blockade by China, which claims Taiwan as its own.

Despite threats from Beijing, Taiwan’s Minister of Economic Affairs, Kung Ming-hsin, stated: “Under current planning, Taiwan will remain the world’s most important producer of artificial intelligence chips.” In response to the announcement, China said it “firmly and consistently opposes any agreement that carries implications related to sovereignty or official relations.”

The agreement must still be approved by Taiwan’s parliament, where lawmakers have already expressed widespread concern that the island could lose control over the sector and cede ground to the United States.

Details of the U.S.–Taiwan agreement

Under the agreement’s terms, the United States will lower tariffs on Taiwanese goods to 15%, down from the current 20% applied reciprocally to address the U.S. trade deficit. Production capacity for advanced AI chips will be split between Taiwan and the United States at an 85–15 ratio by 2030, shifting to 80–20 by 2036, according to official projections.

The U.S. Department of Commerce said Taiwanese semiconductor and technology firms will make “new direct investments totaling at least US$250 billion” to expand capacity in advanced chips and AI-related manufacturing within the United States.

In addition, the U.S. government confirmed that sector-specific tariffs on Taiwanese auto parts, lumber, and wood products will also be capped at 15%, while generic pharmaceuticals and certain natural resources will be exempt from “reciprocal” tariffs.

“Our goal is to bring 40% of Taiwan’s entire supply chain and production to the United States (…) We’re going to bring it all here, so we can be self-sufficient in semiconductor manufacturing,” U.S. Commerce Secretary Howard Lutnick said.