Anbound
Recently, the global financial sector, particularly the banking industry, has shown multiple signs of distress. These developments involve not only regional financial institutions but also several internationally renowned banks. It is evident that anxiety is mounting across the global banking landscape, potentially signaling the emergence of systemic risks in the industry.
Some notable recent indicators of risk within the banking sector include:
First, several regionally significant financial institutions have reported substantial losses. For example, Norinchukin Bank of Japan, which has a history spanning over a century, recorded a net loss of JPY 1.8078 trillion in fiscal year 2024, the largest loss in its history. In its annual report, the bank attributed the loss to heightened uncertainty in the market outlook caused by the Trump administration,
which has kept long-term interest rates elevated in global bond markets. Due to a misjudgment that interest rates would decline, the bank made erroneous bets on U.S. and European bonds. Over the past year, it was forced to sell more than JPY 10 trillion worth of these bonds, resulting in massive losses.
This issue is not confined to Japan. The volatility in long-term bond yields has affected other regions as well. These developments highlight not only the vulnerability of traditionally perceived “safe haven” assets like sovereign bonds in times of economic uncertainty, but also indicate the deep interconnectedness of today’s global financial markets. The Federal Reserve, on one side,
has maintained a firm stance against cutting interest rates, signaling a clear divergence from the Trump administration’s position. On the other side are the major purchasers of U.S. Treasuries, including banks, who had been anticipating rate cuts. The increasingly tense standoff between a Fed unwilling to ease and a Trump administration pushing for lower rates has exacerbated risks in the bond and interest rate markets, prompting many participants to exit.
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