Some analysts have drawn attention to the coincidence of timing between the selloff and the Bank of Japan’s signal that it would allow 10-year Japanese yields as high as 1%.
Perhaps traders are front-running a withdrawal of Japanese capital. At the same time, the theme of the Federal Reserve’s forthcoming Jackson Hole symposium – “structural shifts in the global economy” – has some speculating that bond markets better shift, too, especially at the longer end.
Either way, with inflation-insulated returns of 2% on offer for 10 years the implications for risk appetite across the rest of the financial world are significant.
Small beer on the data calendar on Tuesday will keep the focus on yields and on Fed Chair Jerome Powell’s Jackson Hole speech on Friday.
For one, the move seems to be making Chinese policymakers shy for fear of driving down the currency. Rate cuts on Monday were disappointingly small, and were accompanied by state banks hitting the offshore forwards market to prop up the yuan.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/RBZ23T5HDNJLTMJCO45HR7UVU4.jpg "Skyrocketing yields in the spotlight 40")
