financial insights - fundamental market factors

Actually, yesterday there was a rout in the government bond markets of developed countries.

Yields rose significantly not only at the long end, but also at the short end. (Rising yields = falling bond prices).

Market participants are betting on further acceleration of the global inflationary spiral amid the stalemate situation around the Strait of Hormuz.

At this pace, the pressing question will soon arise of how countries such as the US, Japan, UK, France, and Italy will service and refinance their public debt, which already exceeds 100% of GDP.

By the way, Gulf countries previously invested heavily in the government bonds of the above-mentioned states, but now they no longer have that opportunity. Moreover, they may even start selling previously purchased government bonds, as they themselves currently need liquidity.

It very much looks like a serious debt crisis is brewing in the world, with very severe consequences for the global economy.

Continuing the topic of the impending debt crisis.

In 2012, when the Eurozone faced debt problems, the head of the ECB made a statement that the regulator would do "whatever it takes" to save the euro and prevent defaults by Italy, Spain, and Greece. A large-scale program of purchasing government bonds onto its balance sheet was then launched. Simply put, the printing press was turned on, creating several trillion euros out of thin air and thereby resolving the solvency issues of the Southern European countries.

The situation now is much more complicated. First, France — the second-largest economy in the Eurozone — has been added to the list of problem countries, along with even the United States, where government debt exceeds 100% of GDP. Second, back then inflation levels allowed the ECB to cut rates to zero and print hundreds of billions of euros. But how can this be done under conditions of strong inflationary pressure like we are seeing now? Doing so would only accelerate price growth and trigger a second inflationary wave that would be even larger than the first one, which emerged in 2022 after massive monetary injections aimed at fighting the consequences of COVID lockdowns.

At the moment, it is clear that the leading central banks in Europe and the US have adopted a wait-and-see approach, hoping the situation will somehow resolve itself and they won’t have to raise rates. Meanwhile, investors are voting with their feet and fleeing the bond market, realizing that rising inflation looks inevitable. And the longer regulators wait for things to sort themselves out without taking action, the stronger inflationary expectations will grow — and, accordingly, so will government bond yields.

Central banks are in no rush to raise rates because such a move, combined with sharply higher energy prices, would suppress business activity even further and ultimately lead to a recession.

This is the difficult situation in which the world’s leading central banks now find themselves. No matter which way you turn, there’s a catch. There are virtually no good solutions in this scenario. It is unlikely that serious consequences for the global economy can be avoided.

Interesting dynamics in Rheinmetall shares, one of Germany’s largest defense contractors that produces military equipment.

From its peak, the stock has already fallen 45%, hitting its lowest point in a year. This is quite a strange movement, considering the serious plans for further militarization in Europe.

Could it be that some highly informed investors have started offloading these shares, betting on the imminent end of the SVO and that a major war in Europe will be avoided?

In Japan, the rout in the government bond market continues. Yields on 40-year government bonds have risen to 4.37% — the highest level in history.

With public debt at 250% of GDP, this is now quite significant.

For years, leading international experts wrote the same thing: “Japan’s public debt is enormous, but since interest rates are at zero, it can be easily serviced and refinanced.”

The question is: will it be easy to service this debt at current rates? And most importantly — how? Where will they get the extra money to pay the interest? Yields on 10-year bonds have already climbed to 2.75%, whereas just a few years ago the Bank of Japan was targeting them at 0.5%.

In theory, the most probable outcomes from here are either a slide into hyperinflation or a default. A scenario of strong Japanese economic growth that would meaningfully reduce the debt-to-GDP ratio seems highly unlikely.

What if QE/massive bond buying transmits inflation more slowly than rate cuts since rate cuts translate to cheaper credit in the immediate. But I guess that with debt ratios being what they are today, the market wouldnt need CPI to spike for yields to blow out, if traders believe that QE is being used to cap yields, inflation gets priced in real fast, 2022 UK Gilt crisis style.

So we'll probably see the long end of the yield curve begin to rise with the front end staying pinned due to the central bank not hiking + a delayed rise in CPI + central bank credibility deteriorating + FX beginning to weaken due to the front end staying put while the long end rises due to deteriorating credibility

So ya I think QE still weakens FX, but cuts would blow the currency out completely. Which is why I think the central banks of the world will opt for QE to deal with this Iran-linked rise in CPI, it’s the only easing tool that wont immediately unanchor inflation expectations, but hey maybe with the front end of the curve staying high and the long end getting managed FX will only drift weaker instead of collapsing, which mean the carry trade might stay relatively intact for a lot of pairs

My understanding of bond markets right now is that most central banks won’t touch real QE because it would look like fiscal dominance and unanchor inflation expectations. What they will do is use temporary liquidity tools or market‑functioning ops to calm the belly + long end of the curve while they wait for the Iran/oil situation to cool off. The BoE is the exception, they’re doing QT because they need the credibility boost, the reserve‑cost fix, and the balance‑sheet space.

This is what the "murder" of a national currency looks like.

In this case, we're talking about the Turkish lira.

In 2020, one dollar bought 6 liras, and now it's 45. And as you can see on the chart, the dollar's rise is going non-stop.

Moreover, to prevent the dollar's growth from turning into full "rocket" mode, in March Turkey cut its holdings of US Treasuries almost to zero. This gave them room to conduct interventions on the currency market. On top of that, they had to sell gold reserves to prevent an even more catastrophic collapse of the lira.

This is exactly what the consequences of unconventional monetary policy look like — when authorities tried to combat rising inflation by cutting the key interest rate.

As a result, confidence in the national currency has been destroyed for years to come.

And there you have it — all those oaths of loyalty to Bitcoin and promises of eternal love. Strategy has now sold Bitcoin from its balance sheet for the first time.

Earlier, the largest public Bitcoin miner, Mara, did the same, selling $1.5 billion worth of BTC in the first quarter.

It’s obvious they didn’t start selling out of sheer prosperity — especially after Bitcoin nearly halved from its peak of $126k.

Back in December, Strategy’s founder first admitted he might sell Bitcoin in an extreme market situation. And now it’s happened, even though the market doesn’t really look extremely bad right now (unless you count the S&P 500 skyrocketing). Nevertheless, comrade Saylor has begun selling at current levels.

This feels like a rather ominous sign for the crypto market.

‘This feels like a rather ominous sign for the crypto market'

I wrote that at the end of yesterday’s post.

And now, today, there’s a significant drop in the crypto market.

An interesting situation is currently unfolding in the international currency market.

The dollar has once again climbed to the 160 yen level, which is the red line for the Bank of Japan — a level from which it has already intervened multiple times.

Today, on the hourly USD/JPY chart, you can clearly see selling pressure emerging from the 160 level.

For now, Japan still has the resources to conduct forex interventions. However, any resources are ultimately finite. And if nothing changes fundamentally in the coming months, an uncontrolled collapse of the yen could begin, which in turn could trigger a tsunami across global markets.

I previously wrote about the extremely difficult situation in the Japanese government bond market.

In financial terms, Japan increasingly resembles a powder keg that could explode at any moment.

Crypto took another serious hit on Wednesday.

In 2026, there has been a very strong decoupling between Bitcoin and the US semiconductor stocks index (SOX).

Previously, Bitcoin and SOX were considered a reliable indicator of global investors’ risk appetite. This year, something has gone wrong — it’s not playing out as usual.

By October of last year, they had really pumped up crypto (Bitcoin at $125k, Ethereum at $4,900, and so on) amid talk of investors losing trust in fiat currencies.

Then, in late 2025 and early 2026, they created a real frenzy in the precious metals market, driving gold to $5,500 and silver to $120. This was also done under the narrative of paper currencies losing value.

They herded everyone in at the highs, and now all of this is trading 20–70% below its peak levels.

Now they’re aggressively pushing everyone into everything AI-related. I think this hype will end the same way as it did with crypto and precious metals.

Following the results of Friday, they very harshly 'planed' the investors in precious metals.

And here it is — the most hyped index of the last two months has finally shown weakness. I'm talking about the SOX index (semiconductor stocks in the US), which dropped 10% on Friday.

Previously, this index had correlated very strongly with Bitcoin for several years, but this year it has somehow "decoupled" from it. Not good!

I think that over time it will repeat Bitcoin's movement, which has already more than halved from its peak at $126k.