When the 10-year JGB holds above 3% and USD/JPY breaks lower, Japanese institutional capital repatriates and yen funding costs rise. This compresses multiples on the longest-duration equities and squeezes the most leveraged issuers, while steepening curves and higher reinvestment yields benefit lenders and insurers. Short leg: high-multiple, low or negative free cash flow names whose valuation rests on terminal value more than near-term earnings; heavily indebted issuers with 2027 to 2029 refinancing walls, particularly recent AI-infrastructure debt issuers; bond proxies (REITs, utilities, staples) bought for yield when the risk-free rate was lower. Long leg: banks and life insurers with asset-sensitive balance sheets; Japanese domestic financials specifically, which benefit from both higher domestic yields and repatriation flows; short-duration cash generators trading below 15x with net cash. Entry trigger: 10y JGB closing above 3.0% for three consecutive sessions, or a BoJ hike, combined with USD/JPY down more than 3% in ten sessions. Scale up: if the 30y UST holds above 5.25% and the MOVE index is rising while equity vol is not, that's the flow-driven phase and it tends to move fast. Exit: yen strength stalls for two weeks with 10y JGB back below 2.8%, or oil back under $70 (which removes the inflation impulse driving all of it). Invalidation: a genuine ceasefire or Hormuz de-escalation collapses the energy-inflation term premium, the Fed goes back to cutting, and every leg of this reverses at once.
Criteria not yet parsed. Click "Re-parse Criteria" to analyze this thesis with Claude.