National governments around the world are collectively more than 100 trillion dollars in debt.  The United States accounts for about 35 percent of that total, China accounts for about 16 percent of that total, and Japan accounts for about 10 percent of that total.  For a long time, national governments were able to fund their debt binges very cheaply, but now nervous investors are demanding higher interest rates to hold long-term government debt.  This is driving up borrowing costs, and it has thrown credit markets around the globe into a state of chaos.  If bond yields continue to rise at a very brisk pace, there is a risk that investors could become so nervous that credit markets actually start freezing up.  If that were to happen, the entire global financial system would go completely haywire.

Yesterday, I specifically warned that we need to keep "a close eye on Japanese bond yields".

Today, tepid demand for 20-year Japanese bonds pushed Japanese bond yields into extremely alarming territory…

The Tokyo tremor began on Tuesday, when the government tried to sell 1 trillion yen (£5.2bn) of March 2045 bonds and encountered lacklustre demand.

The average bid-to-cover ratio, which measures investor appetite, dropped to 2.5 – the lowest since 2012. The 1.14-point gap between the average and lowest-accepted prices, known as the "tail", was the longest since 1987.