'Sell America' Panic Grips Markets as Japanese Yields Spike and Wall Street Tumbles

Global financial markets faced a synchronized sell-off on Tuesday, characterized by a resurgence of the 'Sell America' trade. A dramatic spike in Japanese government bond yields, coupled with escalating geopolitical tensions over the US administration's stance on Greenland, shattered the recent calm on Wall Street.

• The S&P 500 plummeted 2.06% to close at 6,796.86.
• The Nasdaq Composite shed 2.39%.
• The volatility index VIX climbed to its highest level since November.

Japanese Bond Rout Spills Over

The epicenter of the tremor was Tokyo. JGBs faced a historic rout driven by fears over Prime Minister Sanae Takaichis aggressive fiscal expansion plans.

• Japan 40-year yields surged 27 basis points to hit a record 4.215%.
• Japan 30-year yields jumped over 26 basis points to 3.875%.

This volatility in the JGB market threatens to unwind the global “carry trade”—where investors borrow cheap yen to fund high-yielding asset purchases elsewhere. The shockwave was felt immediately in the US Treasury market, where the benchmark 10-year yield climbed nearly 8 basis points to 4.293%.

Geopolitics Weighs on Sentinel Assets

Adding to the uncertainty is the diplomatic friction between the US and Europe regarding the US administration's interest in buying Greenland. Reports of potential tariffs on European nations have unnerved investors.

• Gold (XAU/USD) surged approximately 1.6% intra-day, breaking fresh records near $4,765/oz.
• Bitcoin plunged below $90,000, suffering its worst day since October.

Analyst Outlook

Market strategists warn that the “TACO” trade is breaking down. With the US Treasury SecretaryScott Bessent confirming a new Fed Chair nominee could be announced, and funds like AkademikerPension threatening to divest from US Treasuries, the path for the US Dollar and equities remains fraught.