Gum in the Hoover Dam

Gum in the Hoover Dam Japan is raising your mortgage, and nobody can stop it, not even Japan. And that's because your mortgage isn't priced off of the Fed's decision. It's priced off treasury yields, usually the 10-year plus a little spread. So when yields rise, your mortgage rate rises. But here's the problem: The yen is at a 40 year low, and Japan keeps intervening to defend it. And the way they do this is they buy yen and they sell dollars, but they got to get the dollars from somewhere. And those dollars are parked in treasuries because you should know Japan is our largest foreign creditor. They hold $1.1 trillion worth of treasuries. And so last Thursday, they sold $53 billion worth of treasuries in a single day to fund their currency intervention. And this just keeps happening again and again. Every yen rescue creates a forced seller in the treasury market. And the 10-year note just hit its highest yield since January of '25. The 30-year just hit its highest since 2007. And all of this flows straight into the mortgage market. The same monthly payment buys you about 10% less house than it did last month. Washington has picked up on this. And they are joining the trade. Just on Friday, the US Treasury bought Yen for the first time since 1998, and they did so by selling euros, not bonds. And to add an even more helpful hand, the Fed opened a special lending facility for Japan, so future investments don't require them to dump treasuries. This solution is like sticking gum into a crack in the Hoover Dam. The real pressure here is the rate gap between Japan and the US, and both countries refuse to touch rates. And the last time Japan intervened, they spent over 70 billion this spring, and the yen did bounce for a few weeks, and then it just fell right back to where it was before. So these interventions, they just buy you some time, they don't change the trend. What you're seeing is a test of nerve between two superpowers, and Japan has already just blinked the yen sit at 160 for way too long before they intervened. And the moment either side hesitates, that's when the force sellers come back, treasuries get dumped, and every home buyer in the US is gonna pay for it. We're not watching dollar yen as a currency trend. Trade, we're watching it as a countdown to the least affordable housing market in modern history. And the effects don't stop there. If you want to see how we're navigating this market, both on the foreign exchange side as well as the US equity side, just head to my profile, and click the link. Click the link in my profile for our full market analysis Educational purposes only. Not investment advice. Not a recommendation or solicitation to buy/sell any security. Investing involves risk, including loss of principal. Any examples, tickers, or scenarios are illustrative only. Past performance doesn't guarantee future results.