Goldman recommends long JPY to hedge AI selloff and French bond risk

On October 23, 2026, Wallstreetcn reported that Goldman Sachs' FICC team, in a note by trader Jonathon Chryssafis, recommended long Japanese yen positions to institutional clients as a hedge, tying together three threads: a sharp selloff in AI valuations, stress in French government bonds, and an undervalued yen. According to the report, disappointing earnings from AI giants renewed doubts about the durability of the technology trend. Three negative developments compounded: Tesla cut capital spending, Meta's AI spending pushed its credit default swaps (CDS) to a record high, and Lam Research issued disappointing guidance. Together they prompted hedge funds to accelerate their exit from the tech sector.

The report argued that the real epicenter of the AI valuation shock is the credit market rather than equities, particularly bonds from lower-rated borrowers, with data-center bonds drawing focus. The material cites dollar project-finance bond issuance for 2026 through October 13 but does not provide the full figure. In France, the spread between French and German government bonds has widened to its broadest level since the euro was created, and the French 10-year yield has topped 5%, above its absolute level during the eurozone debt crisis.

Goldman Sachs concluded that these risks all point in the same direction: waning appeal of dollar assets and capital flowing back to Japan, which would push the yen higher. Its long-term fair-value model shows the yen undervalued by roughly 40% against the dollar, making it the most undervalued currency the team tracks. The available information stops at the report's recommendation and judgments; no subsequent market reaction or further developments have been reported.