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(Bloomberg) -- US Treasuries are facing increased competition from Japanese bonds, where rising yields are making the notes more attractive for local buyers, according to Deutsche Bank AG.

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George Saravelos, head of FX research, flagged the recent divergence between US yields and the Japanese yen exchange rate. He called the move the “single most important market indicator of accelerating US fiscal risks,” because it shows wary foreign buyers are divesting cash from the Treasury market.

“The Japanese yen is strengthening even as US yields are rising,” Saravelos wrote in a note. “We consider this as evidence that foreign participation in the US Treasury market is declining.”

Economic uncertainty and concern about the Bank of Japan reducing its bond purchases have hit Japanese debt recently, taking the 30-year yield to the highest level since records began in 1999. An auction of 20-year notes on Tuesday attracted the weakest demand in more than a decade.

Now, the elevated yields are at a level where they’re starting to lure overseas investors, including Vanguard and RBC BlueBay Asset Management, with domestic buyers potentially set to follow.

Thirty-year JGBs are sending a concerning signal to their US counterparts, Morgan Stanley strategists including Matthew Hornbach wrote in a note.

But “investors looking for alternatives to longer maturity USTs should be aware of the potential value trap forming in long-end JGBs,” he said, warning that JGBs are “likely to cheapen further as a result of the structural oversupply and lack of demand.”

The 30-year Treasury yield jumped as high as 5.1% on Wednesday, just shy of a two-decade high. The 10-year yield climbed 11 basis points to 4.6%.

Read: Bond Market Warns Trump, Congress on Dangers of Swelling Deficit

In Japan, 30-year bond yields this week touched 3.185%. The yen strengthened as far as 143.29 against the dollar on Wednesday, and was trading 143.44 early Thursday in Tokyo.

“The JGB selloff is a bigger problem for the US Treasury market,” Saravelos at Deutsche Bank wrote. “By making Japanese assets an attractive alternative for local investors, it encourages further divestment from the US.”

Read: A $3 Trillion Threat to Global Financial Markets Looms in Japan

Japan is the biggest overseas holder of US Treasuries with ownership amounting to $1.13 trillion as of March. That’s the result of years of ultra-easy monetary policy that drove domestic buyers oversees in search of higher returns.