🚨 Japan Just Broke The French Bond Market One Tokyo fund (Sumitomo Mitsui DS) didn’t trim exposure. It dumped every French government bond it held and rotated into German Bunds and short-term Japanese paper. Not a reduction. Full exit. Something that even shocked the Financial Street. The France-Germany 10-year spread blew past 140 basis points, the widest gap since the euro crisis. France's 5-year CDS has spiked up to 81 basis points, the highest since 2013. The higher the number, the greater the risk of national bankruptcy. French domestic holders are now facing a deeper mark-to-market loss and a less liquid exit to sell into the same one-way market. Japanese investors still sit on roughly ¥25 trillion of French debt, second only to American holders and this was a single manager’s book. Carry trades that funded higher-yielding global debt market with cheap yen just got a live demo of how fast the unwind can hit. When the bid from Japan disappears, the largest European sovereign market has to find new buyers at the same time its own government is arguing over a deficit plan that markets already distrust. If more Japanese money follows the same exit, the same flow that once compressed euro spreads can reprice them in the other direction. We now understand what @yutokanzakireal meant by saying “Japan is bringing the entire house down” in response to Scott Bessent’s “I am the house now” statement: Ending cheap-yen funding is forcing a margin call on the leveraged global debt system built on the carry trade and not just the U.S. leverage. France just got the first real look at what Japan’s wealth returning to the homeland looks like.