Japanese investors are reacting to the Fed's tightening message.

While the Fed is expected to enter a historical tightening process; Japanese investors began to sell US bonds. The action of Japanese institutional investors, who are the largest buyers of US bonds outside the USA, caused the eyes to be turned to the Fed once again.

Fed's Tightening Message Moves Japanese Investors. While global markets were locked into the Fed's interest rate decision that will be announced tomorrow, Japanese investors, the largest buyer of US bonds outside the USA, took action before the decision. In the past three months alone, Japanese institutional investors have sold nearly $60 billion worth of bonds, according to current data compiled by BMO Capital Markets. BMO Strategist Ben Jeffery stated that the sales figures have reached a serious level in his evaluation on the subject. On the other hand, Japanese investors already have a bond portfolio of $1.3 trillion.

Preparing for the Most Aggressive Rate Increase in 28 Years

The U.S. bond market is positioned at the peak of pricing, with the expectation of the Fed's most aggressive rate hike since 1994. The Fed has not made such a move since its rightful 75 basis point increase at the end of 1994, when interest rates rose from 3 percent to 6 percent.