"The Crocodile Jaw": When the ground splits between the two largest economies

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In the world of macroeconomics, charts are not just lines, but stories that narrate the transformations of nations.

What we see in this chart is what veterans call
"The Crocodile Jaw" (The Crocodile Jaw)..
It’s a gap that rarely widens this way without consequences.
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The scene in brief:
US bond yields (the declining line) are falling on expectations of rate cuts, while Japanese bond yields (the sharply rising line) are soaring to record levels.

This stark divergence means one thing:
A split in monetary policies.
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While the Western world attempts a soft landing, Japan finds itself in a historic predicament.

Such a violent rise in yields threatens the stability of the Japanese bond market, which may force the central bank there to use its last weapon:
Yield Curve Control (Yield Curve Control) once again to save the situation.
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Why should you care about treasury bonds between East and West?
Because Japan is the largest creditor to the United States. When the bond market in Tokyo is disturbed, liquidity in New York and London is shaken.

We are witnessing a global "reassessment" moment, and whoever thinks that what happens in Japan stays in Japan...
has miscalculated.

These "jaws" don’t stay open forever... and when they close, the closure is usually painful for those caught in the middle.

How do you expect this to affect the yen and the dollar?
Join the discussion...

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