Welcome back from Memorial Weekend. This week brings more key Treasury market action, Nvidia earnings, and I’d bet more volatility for stocks.

Today we’re unpacking why Americans should be paying attention to what’s happening in Japan.

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Economics ”worse than Greece’s”

The world’s least risky asset class is making noise out of Tokyo.

When Japanese Prime Minister Shigeru Ishiba compared his country’s fiscal situation to Greece’s, markets responded with one of the weakest sovereign bond auctions in recent history.

That should concern US investors.

The Bank of Japan has spent decades suppressing bond yields, yet last week’s failed 20-year auction for Japanese government bonds (JGBs) suggests the easy-money era there is ending.

• Japan’s 30-year bond yields rose above 3% to the highest since 1999

• Japan’s 40-year bond yields hit 3.6%, a record high

Falling demand for government debt stems from worsening fears over fiscal stability. That bodes particularly ill in a nation like Japan, where domestic investors and the central bank own over 80% of the bonds.

Rising yields in Japan mean global investors could soon demand higher yields everywhere else. The US — with a sizable portion of its debt held by foreign entities — could be even more vulnerable to market tumult.

Indeed, as Opening Bell Daily reported, signs of trouble are already bubbling over.

US stocks sold off following a weak 20-year Treasury auction, which pushed yields on 20- and 30-year notes above 5%.

The VIX, meanwhile, surged 15% that day.

That kind of cross-asset volatility isn’t normal. It suggests that investors — in the US and overseas — are paying more and more attention to sovereign credit risks.

And it’s not for nothing. Among recent developments:

• President Trump’s “big beautiful bill” could add another $3 trillion to the US deficit over the next decade, according to some estimates

• Congressional Budget Office forecasts US debt will hit $54.4 trillion by 2034

• Moody’s downgraded the US’s credit rating from AAA to Aa1 this month

Historically, investors have treated bonds like risk-free bets. All of the above has dented that confidence, and the latest out of Japan proves even domestic bondholders have their limits.

The key question, then, is what happens when foreign buyers start doubting the fiscal credibility of the US?

Today, Japan is the largest foreign holder of US debt, with more than $1.13 trillion in Treasurys. But if Japanese yields keep rising, that capital may flow out of US bonds and back to Tokyo.

“If sharply higher JGB yields entice Japanese investors to return home, the unwinding of the carry trade could cause a loud sucking sound in US financial assets,” said Société Générale strategist Albert Edwards.

“Hence, I would rank trying to understand and follow the surging long end of the JGB market as the number one most important thing for investors at the moment.”

Market snapshot

Elsewhere

🇪🇺 President Trump delayed EU tariffs on Sunday. He had called last week for a 50% levy on EU goods to start June 1, but he moved to delay the roll out of the duties to July 9. European stocks rebounded on the news though investors remain skeptical of EU-US trade relations. (CNBC)

📊Nvidia reports earnings on Wednesday. Its fiscal first quarter results hit after the bell after an up-and-down start to the year for shareholders. Nvidia has dealt with setbacks including the White House’s ban on H20 chips to China and concerns around semiconductor tariffs. Shares are down 5% year-to-date. (Yahoo Finance)

📰 Student loan payments are back. Millions of borrowers are back on the hook and seeing sinking credit scores following years of paused debts. Around 5.6 million individuals were marked newly delinquent in the first three months of the year. (WSJ)

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Rapid-fire

• “Mission: Impossible” and “Lilo & Stitch” helped deliver a record Memorial box office weekend (WSJ)

• Businesses are finding a legal workaround for tariffs called the “first sale rule” (CNBC)

• Japanese Prime Minister Shigeru Ishiba said Tokyo aims to advance tariff talks with the US as soon as next month (Reuters)

• US ETFs have collected a record $437 billion in new assets so far this year (WSJ)

• Trump Media will raise $3 billion to spend on cryptocurrencies (Reuters)

• SpaceX is pushing to get a rocket ready for Mars by next year (WSJ)

• Apple stock has dropped for eight trading days in a row (Investopedia)

• Russia hit Ukraine with its largest-ever drone and missile attack early Monday (WSJ)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

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