Japan's bond market is seeing historic volatility. The 10Y Japanese government bond yield dropped -16 basis points on Friday, to 2.71%, the largest daily decline since April 2025. This follows a rise to 2.90% on Thursday, the first time the 10Y JGB yield reached that level in 30 years. At the same time, the 30Y JGB yield fell -13 basis points, to 3.87%, the largest daily drop since January 21st. This came after Japan's Finance Minister said the government wants to encourage pension funds, including the $1.8 trillion Government Pension Investment Fund, to increase investment in domestic assets. If this materializes, Japan's largest pension fund could eventually shift allocation away from overseas securities and toward JGBs, easing pressure on the domestic debt market. The move could also support the Yen by reducing capital outflows from Japan. Japan’s bond and currency markets are set to remain highly volatile.(The Kobeissi Letter)