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EndGame Macro
The Part People Miss About Falling Yields
When the 3 year drops like this, most folks instinctively see it as good news…easier money, relief, a sign things are calming down. But in the real plumbing of the system, fast rate declines don’t land softly. They hit balance sheets, hedges, and cash flows immediately.
When yields fall quickly, anyone who was positioned the other way that are short Treasuries, paying fixed in swaps, running duration hedges takes an instant mark to market loss. And in modern markets, losses aren’t theoretical. They trigger margin calls. Real cash, due right now. That’s how you end up with global collateral calls even when the headline narrative is rates are easing.
A lot of that hedging sits in global institutions, leveraged vehicles, mortgage portfolios, foreign reserve managers, all linked through dollar collateral. When those calls hit, people sell what’s liquid, pull back on lending, and raise cash however they can. Paradoxically, falling yields can briefly tighten conditions for the players holding the hedges.
Why Lower Rates Can Feel Like Lower Income
There’s also the slow grind effect. When rates fall, income on collateral drops, reinvestment yields fall, and net interest margins get squeezed. You don’t feel it instantly, but across the system, it reduces the carry cushion that keeps risk taking comfortable. Lower rates aren’t always a stimulus…sometimes they quietly drain the compensation that investors and lenders rely on.
And then there’s housing. When rates fall, it reopens the refinancing door. Even a modest move lower can restart the prepayment cycle after a long freeze. Once that happens, mortgage bonds shorten in duration. Investors who hold them then have to buy duration back often by buying Treasuries or receiving fixed in swaps,
which can push yields lower still. It’s the old negative convexity loop.
What This Really Signals
The risk here isn’t that rates are lower, it’s how fast they’re getting there. Quick drops expose leverage, force cash out of hiding, and shake up the mortgage hedge complex. That’s the kind of move that looks calm from a distance but feels stressful underneath. The market might be right about growth slowing, but that doesn’t mean the adjustment will be orderly.
tweet
The Part People Miss About Falling Yields
When the 3 year drops like this, most folks instinctively see it as good news…easier money, relief, a sign things are calming down. But in the real plumbing of the system, fast rate declines don’t land softly. They hit balance sheets, hedges, and cash flows immediately.
When yields fall quickly, anyone who was positioned the other way that are short Treasuries, paying fixed in swaps, running duration hedges takes an instant mark to market loss. And in modern markets, losses aren’t theoretical. They trigger margin calls. Real cash, due right now. That’s how you end up with global collateral calls even when the headline narrative is rates are easing.
A lot of that hedging sits in global institutions, leveraged vehicles, mortgage portfolios, foreign reserve managers, all linked through dollar collateral. When those calls hit, people sell what’s liquid, pull back on lending, and raise cash however they can. Paradoxically, falling yields can briefly tighten conditions for the players holding the hedges.
Why Lower Rates Can Feel Like Lower Income
There’s also the slow grind effect. When rates fall, income on collateral drops, reinvestment yields fall, and net interest margins get squeezed. You don’t feel it instantly, but across the system, it reduces the carry cushion that keeps risk taking comfortable. Lower rates aren’t always a stimulus…sometimes they quietly drain the compensation that investors and lenders rely on.
And then there’s housing. When rates fall, it reopens the refinancing door. Even a modest move lower can restart the prepayment cycle after a long freeze. Once that happens, mortgage bonds shorten in duration. Investors who hold them then have to buy duration back often by buying Treasuries or receiving fixed in swaps,
which can push yields lower still. It’s the old negative convexity loop.
What This Really Signals
The risk here isn’t that rates are lower, it’s how fast they’re getting there. Quick drops expose leverage, force cash out of hiding, and shake up the mortgage hedge complex. That’s the kind of move that looks calm from a distance but feels stressful underneath. The market might be right about growth slowing, but that doesn’t mean the adjustment will be orderly.
Beware of lower rates.
This produces global collateral calls this reduces income, and this will accelerate mortgage pre-payments https://t.co/A1m7sN3Chk tweet
Offshore
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WealthyReadings
$TMDX is going through its breakout retest now instead of exploding into more volatility later.
This is a clean breakout-consolidation. It could even pull back to around $130 without bothering me at all.
We're still going higher. Much higher if you believe the valuation I shared a few days ago - link's in bio.
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$TMDX is going through its breakout retest now instead of exploding into more volatility later.
This is a clean breakout-consolidation. It could even pull back to around $130 without bothering me at all.
We're still going higher. Much higher if you believe the valuation I shared a few days ago - link's in bio.
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Offshore
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Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: Visa was JUST trading at a 4% FCF yield & legendary investor Chris Hohn increased his $V stake by +47%, making it 18% of TCI Fund 💵
Here’s what $V has returned (CAGR %) each time it hit a 4% FCF yield for the first time in a given year since 2016
1. +17.8% CAGR | (1/19/16)
2. +16.2% CAGR | (9/27/17)
3. +15.6% CAGR | (2/8/18)
4. +12.2% CAGR | (8/5/19)
5. +15.6% CAGR | (3/16/20)
6. +17.1% CAGR | (3/7/22)
7. +18.0% CAGR | (9/21/23)
8. +13.9% CAGR | (4/24/24)
9. ❓ | (11/14/25)
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️
𝐓𝐡𝐢𝐬 𝐜𝐨𝐧𝐭𝐞𝐧𝐭 𝐢𝐬 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐚𝐧𝐝 𝐞𝐝𝐮𝐜𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐜𝐨𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞, 𝐚𝐧 𝐨𝐟𝐟𝐞𝐫, 𝐨𝐫 𝐚 𝐬𝐨𝐥𝐢𝐜𝐢𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐨 𝐛𝐮𝐲 𝐨𝐫 𝐬𝐞𝐥𝐥 𝐚𝐧𝐲 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐲.
𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐨𝐥𝐝 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝. 𝐀𝐧𝐲 𝐨𝐩𝐢𝐧𝐢𝐨𝐧𝐬 𝐞𝐱𝐩𝐫𝐞𝐬𝐬𝐞𝐝 𝐚𝐫𝐞 𝐚𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐝𝐚𝐭𝐞 𝐨𝐟 𝐩𝐮𝐛𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐬𝐮𝐛𝐣𝐞𝐜𝐭 𝐭𝐨 𝐜𝐡𝐚𝐧𝐠𝐞 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐧𝐨𝐭𝐢𝐜𝐞.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲 𝐨𝐫 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
tweet
RT @DimitryNakhla: Visa was JUST trading at a 4% FCF yield & legendary investor Chris Hohn increased his $V stake by +47%, making it 18% of TCI Fund 💵
Here’s what $V has returned (CAGR %) each time it hit a 4% FCF yield for the first time in a given year since 2016
1. +17.8% CAGR | (1/19/16)
2. +16.2% CAGR | (9/27/17)
3. +15.6% CAGR | (2/8/18)
4. +12.2% CAGR | (8/5/19)
5. +15.6% CAGR | (3/16/20)
6. +17.1% CAGR | (3/7/22)
7. +18.0% CAGR | (9/21/23)
8. +13.9% CAGR | (4/24/24)
9. ❓ | (11/14/25)
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️
𝐓𝐡𝐢𝐬 𝐜𝐨𝐧𝐭𝐞𝐧𝐭 𝐢𝐬 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐚𝐧𝐝 𝐞𝐝𝐮𝐜𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐜𝐨𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞, 𝐚𝐧 𝐨𝐟𝐟𝐞𝐫, 𝐨𝐫 𝐚 𝐬𝐨𝐥𝐢𝐜𝐢𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐨 𝐛𝐮𝐲 𝐨𝐫 𝐬𝐞𝐥𝐥 𝐚𝐧𝐲 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐲.
𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐨𝐥𝐝 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝. 𝐀𝐧𝐲 𝐨𝐩𝐢𝐧𝐢𝐨𝐧𝐬 𝐞𝐱𝐩𝐫𝐞𝐬𝐬𝐞𝐝 𝐚𝐫𝐞 𝐚𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐝𝐚𝐭𝐞 𝐨𝐟 𝐩𝐮𝐛𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐬𝐮𝐛𝐣𝐞𝐜𝐭 𝐭𝐨 𝐜𝐡𝐚𝐧𝐠𝐞 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐧𝐨𝐭𝐢𝐜𝐞.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲 𝐨𝐫 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
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Offshore
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memenodes
Friend: “So, you gonna cash out at least now,when Bitcoin hits $100K?”
Me: https://t.co/hsRKygxmhM
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Friend: “So, you gonna cash out at least now,when Bitcoin hits $100K?”
Me: https://t.co/hsRKygxmhM
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WealthyReadings
Stop complaining about the $PYPL CFO telling the truth.
Weakness is here for longer. The mistake isn't on them for being honest; it's on us for selecting a weaker stock than we thought.
Accept the truth and move on. Don't blame it on them.
Focus on your next move. That is all that matters.
tweet
Stop complaining about the $PYPL CFO telling the truth.
Weakness is here for longer. The mistake isn't on them for being honest; it's on us for selecting a weaker stock than we thought.
Accept the truth and move on. Don't blame it on them.
Focus on your next move. That is all that matters.
tweet
Offshore
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EndGame Macro
🇯🇵 The Calm Before the Carry Trade Cracks
Japan’s 10 year yield pushing up means bond prices are slipping and lenders are basically saying, “If I’m going to lend to Japan, I want more interest.” Simple.
Why it matters is Japan has been the world’s cheap funding source for years. Borrow yen for almost nothing, go buy something that pays more somewhere else. The moment Japanese yields rise, even a little, it changes the math on a massive amount of global positioning.
Even with Japan’s 10Y around 1.89%, the U.S. curve is still sitting much higher, front end near the high 3s, 10Y around 4.06%, 30Y around 4.73%. The UK is even higher at the long end. So yes, Japan is lifting off zero, but globally it’s still cheapish compared to where real yield is being paid.
Now look at USD/JPY. We’re still around 155+. That’s the twist. If Japan were truly escaping the cheap money era in a way markets believed would stick, you’d usually see the yen start to firm. But it hasn’t. That tells you the market still thinks Japan’s move is gradual, and the dollar still has gravity with higher yields, safe haven reflexes, and years of embedded behavior that treats the yen like a funding tool.
So what’s the outcome?
First, higher Japanese yields start pulling some money back home, not dramatically at first, but enough to matter. Japan’s savings pool is huge. If you can finally earn something domestically, you don’t need to reach as far into U.S. credit, EM, or long duration bets. Even small shifts there ripple because the base is so large.
Second, this should support the yen… but only if it actually compresses the gap with the U.S. and changes behavior. Right now the curves say the gap is still wide, and the FX chart says the same thing in plain language that the world is still choosing dollars, and the yen is still being used like a tool. Fund first, think later.
Third, this is a volatility story more than a Japan growth story. Japan lifting off the floor isn’t just Japan news. It’s the last big anchor moving. Markets can handle it if it creeps. They struggle if it jumps because a ton of global risk taking assumes yen funding stays cheap and predictable.
My Read
This isn’t about whether the 10 year is 1.89% today. It’s about the regime shift…Japan is drifting from yields are a policy choice to yields are a market problem again. Once markets believe that, global flow math changes.
And USD/JPY at 155+ isn’t a comfort blanket. It’s a warning label. It screams one way positioning. One way markets don’t unwind politely. They sit there… until something forces them to move.
If a global slowdown takes hold (increasingly likely)
That something is usually growth breaking. In a slowdown, U.S. and European yields tend to fall faster than Japan’s simply because they’ve got more room to fall. That compresses the spread which matters for USD/JPY. At the same time, risk off behavior unwinds carry trades and that’s when the yen can strengthen quickly because people rush to close funding.
So you get the nasty cocktail of weaker growth, falling global yields, spread compression, and a sudden urge to derisk. In that environment USD/JPY doesn’t gently drift lower. It can drop in chunks, because the funding trade flips and money heads home.
Rising JGB yields are the market tapping the glass. Japan isn’t just a country, it’s a funding pillar. And when that pillar starts shifting while USD/JPY is still pinned high, that’s when the whole room can move all at once.
tweet
🇯🇵 The Calm Before the Carry Trade Cracks
Japan’s 10 year yield pushing up means bond prices are slipping and lenders are basically saying, “If I’m going to lend to Japan, I want more interest.” Simple.
Why it matters is Japan has been the world’s cheap funding source for years. Borrow yen for almost nothing, go buy something that pays more somewhere else. The moment Japanese yields rise, even a little, it changes the math on a massive amount of global positioning.
Even with Japan’s 10Y around 1.89%, the U.S. curve is still sitting much higher, front end near the high 3s, 10Y around 4.06%, 30Y around 4.73%. The UK is even higher at the long end. So yes, Japan is lifting off zero, but globally it’s still cheapish compared to where real yield is being paid.
Now look at USD/JPY. We’re still around 155+. That’s the twist. If Japan were truly escaping the cheap money era in a way markets believed would stick, you’d usually see the yen start to firm. But it hasn’t. That tells you the market still thinks Japan’s move is gradual, and the dollar still has gravity with higher yields, safe haven reflexes, and years of embedded behavior that treats the yen like a funding tool.
So what’s the outcome?
First, higher Japanese yields start pulling some money back home, not dramatically at first, but enough to matter. Japan’s savings pool is huge. If you can finally earn something domestically, you don’t need to reach as far into U.S. credit, EM, or long duration bets. Even small shifts there ripple because the base is so large.
Second, this should support the yen… but only if it actually compresses the gap with the U.S. and changes behavior. Right now the curves say the gap is still wide, and the FX chart says the same thing in plain language that the world is still choosing dollars, and the yen is still being used like a tool. Fund first, think later.
Third, this is a volatility story more than a Japan growth story. Japan lifting off the floor isn’t just Japan news. It’s the last big anchor moving. Markets can handle it if it creeps. They struggle if it jumps because a ton of global risk taking assumes yen funding stays cheap and predictable.
My Read
This isn’t about whether the 10 year is 1.89% today. It’s about the regime shift…Japan is drifting from yields are a policy choice to yields are a market problem again. Once markets believe that, global flow math changes.
And USD/JPY at 155+ isn’t a comfort blanket. It’s a warning label. It screams one way positioning. One way markets don’t unwind politely. They sit there… until something forces them to move.
If a global slowdown takes hold (increasingly likely)
That something is usually growth breaking. In a slowdown, U.S. and European yields tend to fall faster than Japan’s simply because they’ve got more room to fall. That compresses the spread which matters for USD/JPY. At the same time, risk off behavior unwinds carry trades and that’s when the yen can strengthen quickly because people rush to close funding.
So you get the nasty cocktail of weaker growth, falling global yields, spread compression, and a sudden urge to derisk. In that environment USD/JPY doesn’t gently drift lower. It can drop in chunks, because the funding trade flips and money heads home.
Rising JGB yields are the market tapping the glass. Japan isn’t just a country, it’s a funding pillar. And when that pillar starts shifting while USD/JPY is still pinned high, that’s when the whole room can move all at once.
Someone explain to me what the outcome of this will be like I’m a 4th grader.
Seriously.
Paging all bond experts. https://t.co/G34Bu8qLEv tweet