Key Points:
Cross-border transmission: Yen collapse to 163.99 → Bank of Japan dumps $26.4 billion in Treasuries → U.S. yields climb to force in domestic buyers.
The scale: Foreign holders shed $72.1 billion of U.S. Treasuries in June alone, the steepest one-month drop since March, with Japan, the UK, and mainland China all net sellers.
Fed on deck: Markets are pricing roughly 65% odds of a rate hike at the September 15-16 Fed meeting, a move that would lift the 30-year mortgage rate off its current 6.7% level.
Yield confirmation: The 30-year Treasury yield has held above 5% for 55 straight sessions, the longest run since 2006, and hit 5.34% in mid-August, the highest reading since 2007.
A friend of mine tried to refinance his house last week. The bank came back with a rate near 6.7%. He blamed the Fed. He was wrong.
The real story starts in Tokyo. And I can't stop thinking about it.
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In June, Japan sold $26.4 billion of our government bonds. In one month. They did it to save the yen, which had crashed to 163.99 against the dollar. That's the weakest the yen has been since December 1986. Reagan was still president. Gas was under a dollar. Most people reading this were in grade school.
Japan has been our biggest foreign lender for 40 years. Four decades of a quiet handshake. They buy our bonds. Their currency stays cheap. Their goods sell well over here. We get cheap interest at home. Everybody wins.
That handshake is falling apart.
The UK sold our bonds in June too. So did China. Foreign holdings of U.S. debt fell $72.1 billion in a single month. That's the steepest drop since March. And I don't think most people realize what it does to us.
When foreign buyers walk away, our government has to find new ones. To find them, we have to pay higher interest. Higher interest on Treasuries pulls up rates on everything else. Mortgages. Car loans. Credit cards. Small business loans. The whole chain climbs.
Your neighbor's rate went up because someone in Tokyo picked up a phone.
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That's why the 30-year Treasury yield hit 5.34% in mid-August. Highest since 2007. It's been above 5% for 55 straight days. Worst stretch since 2006. Almost no one is talking about it. But every homebuyer in America is paying for it.
My friend's mortgage quote is 6.7% because Japan is fighting to save its currency. He has no idea. His banker doesn't either. Most of Wall Street isn't saying it out loud.
Here's what worries me. Our own government now pays $2.8 billion a day just in interest on the national debt. A day. Not a month. A single day. That bill climbs every time a foreign country sells our bonds. And there is no button we can press to stop them.
I get it. This sounds far away. Yen. Bonds. Tokyo. It feels like someone else's problem. But it lands in your wallet. It lands in your kid's first mortgage. It lands on the sticker of your next truck. It lands in the small print of every credit card you carry.
Think about a young couple looking at a starter home. Two years ago, they might have locked in a 3% rate. Today, they're staring at 6.7%. On a $350,000 loan, that's more than $700 extra every month. For 30 years. That's a family vacation. That's college savings. That's dinners out gone.
The Fed meets September 15 and 16. Odds of a rate hike sit near 65%. If they raise, mortgage rates climb again. If they hold, the dollar may weaken. That would push foreign selling even harder. There is no good door to walk through.
Nobody knows how bad this gets. Japan may sell more. China may sell more. Every dollar they pull is a dollar Uncle Sam has to replace at a higher price.
The number I keep repeating to myself is that date. December 1986. Forty years ago. The yen has not been this weak in our whole adult lives. That's not a stat you shrug off. That's a system quietly ending, in real time, while the rest of the country is watching something else.
I wish I had better news. I don't.
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Picture the guy at the mortgage desk in your local bank. He's typing your rate into a screen. He doesn't know why the number is this high. He blames the Fed. His customer blames the Fed. And a world away, a banker in Tokyo is selling more of our debt to hold his own house together.
That's the trade now. Their problem. Our bill.
More on this tomorrow.
— American Ledger
