Japan Bond Turmoil Risks Up to $130 Billion Treasury Selling, Citi Says

A sharp rise in volatility in Japan’s government bond market could spill over into other markets — especially US Treasuries — forcing some investors to cut back risk across portfolios, Citigroup Inc. said.

Risk parity funds, which allocate capital across multiple asset classes from stocks to bonds and commodities with equal volatility, may need to sell as much as one third of their current exposure, potentially triggering up to $130 billion of bond selling in the US alone, Mohammed Apabhai, head of Asia trading strategy at Citigroup Global Markets, wrote in a note to clients on Tuesday.