France is confronting its highest government bond borrowing costs in more than two decades, with its 10-year rate reaching 4.96% last week. The pressure intensified after a major Japanese fund manager sold all of its French government debt holdings.
Shinji Kunibe, who runs the global bond team at Sumitomo Mitsui DS Asset Management, redirected the proceeds into German bonds and short-term Japanese debt. The decision reflects concern over France's debt levels, which stand at approximately 119% of annual economic output.
France has maintained access to capital markets despite the turmoil. The country sold about €12 billion in long-term bonds on October 1, with bids arriving at roughly double that amount, according to France's debt office.
Japan's Weekly Data to Clarify Scope of Selling
Japan's Ministry of Finance will release weekly trading data on October 8 at 8:50 a.m. Tokyo time, tracking activity by the country's largest banks, insurers, and funds. The previous report, covering September 26, already showed Japanese investors dumping a net ¥684.5 billion ($4.3 billion) of foreign bonds that week, with outflows of ¥1.9 trillion ($12 billion) the week before.
The data does not specify individual countries, grouping all foreign bond sales together. Kunibe's French bond sale occurred after the previous report's cutoff date, meaning Thursday's numbers may reveal whether the selling broadened.
Implications for Cryptocurrency Markets
The yen carry trade—where investors borrow cheap yen to purchase higher-yielding assets abroad—has drawn attention from cryptocurrency traders. The Bank for International Settlements estimated these trades at approximately $250 billion before the August 2024 market disruption.
Bitcoin declined as much as 20% during the 2024 yen shock, suggesting crypto markets are sensitive to shifts in Japanese capital flows. However, Bitcoin has shown resilience in subsequent volatility. In September, when the yen strengthened 3.7% in days, Bitcoin remained above $79,000. As of Sunday, Bitcoin traded at $85,363.
