Japan’s ¥2.59 trillion bond sales raise Bitcoin funding question

Japan-resident institutions sold a net ¥2.5894 trillion of foreign long-term debt from Sept. 13 to 26, according to data from Japan’s Ministry of Finance. The data do not identify Bitcoin transactions or show which foreign securities were sold.

The sales occurred before Japan’s Oct. 6 auction of 10-year government bonds. The average yield rose to 3.101%, up from 2.995% at the Sept. 1 auction. Competitive coverage increased to about 3.76 times the amount sold, from 3.29 times.

The Ministry of Finance reported net foreign long-term debt sales of ¥1.9049 trillion for Sept. 13–19 and ¥684.5 billion for Sept. 20–26. The figures cover designated major Japan-resident reporting institutions and classify foreign securities by the issuer’s country of residence.

The auction’s yield tail narrowed to 0.2 basis points from 1.6 basis points. The tail measures the difference between the average yield and the yield at the lowest accepted price. Higher coverage and a smaller tail accompanied the higher average yield.

The data do not show whether the institutions sold U.S. Treasurys or other foreign bonds, converted the proceeds into yen, bought Japanese government bonds or purchased Bitcoin.

The 10-year government bond yield also does not measure the cost of short-term yen borrowing used in leveraged carry trades. The auction result therefore does not establish whether carry-trade positions were closed or Bitcoin positions were sold.

A Bank for International Settlements working paper covering 2017 through mid-2024 examined global funding conditions and speculative activity as factors in cross-border flows involving Bitcoin and Ether. In an August 2024 analysis, BIS researchers described how deleveraging and higher margin requirements amplified market volatility.