The Yen is tumbling.
That's happening because 10-year JGB yield is being kept artificially low by BoJ. Japan has to do that because debt is 250% of GDP, so allowing 10-year JGB yield to rise freely would lead to a debt crisis. Yen weakness is the price Japan has to pay for this. Source: Robin Brooks, Bloomberg
A 2nd Trump term is a problem for the Euro periphery. US deficits will widen, putting upward pressure on global yields as the US sucks in capital.
That's bad news for high debt Italy and Spain. Both countries had all the time in the world to cut debt. Both countries did nothing. Source: Robin Brooks
Q2 Fixed Income Review Chart: US Treasury Yields Resilient Amid Mixed Economic Signals!
As the second quarter of 2024 unfolded, a noticeable normalization of the US economy became evident, marked by a significant downturn in the US Citi Economic Index from 33 to -29, reaching its lowest level in nearly two years. Despite these economic headwinds, the 10-year US Treasury yields closed the quarter slightly higher at 4.30%, a 10-basis point increase. This apparent contradiction between economic normalization and rising yields can be largely attributed to substantial US Treasury issuances, necessary to fund the expansive US fiscal deficit. Furthermore, persistent inflationary pressures have prompted the central bank to delay the anticipated rate cut from July to November 2024, adjusting expectations amid changing economic conditions. As we approach a typically low-liquidity summer period, any shifts in interest rates could be magnified. Additionally, with the US presidential election on the horizon, market sentiments could be further influenced by electoral outcomes. The looming question is: Which will have a greater impact on third-quarter rates—the slowdown in the US economy, the ongoing inflationary and supply pressures, or the unfolding political landscape? #Finance #Economy #TreasuryYields #EconomicIndicators #Inflation #FiscalPolicy #InterestRates #USPresidentialElection #MarketAnalysis Source: Bloomberg
France vs German 10 year spread keeps moving even higher...
Source: The Market Ear
BREAKING 🚨: U.S. Treasury Market
Treasury liquidity is now at its worst point in AT LEAST the last 14 years, surpassing even the onset of Covid Source: Barchart, Robin Brooks
Net inflow to TLT! Is the rate cut hope-timism back?
Source: Andreas Steno Larsen, Steno Research, Macrobond
The end of ice age... Will we come back one day to a world of negative yielding debt???
Below chart shows the USD Market Value of negative yielding debt. It peaked above $18T after Covid... Source: Bloomberg
According to Nikkei, Japans Norinchukin Bank:
Japan's 5th largest bank with $840 billion in assets - will sell more than 10 trillion yen ($63 billion) of its holdings of U.S. and European government bonds during the year ending March 2025 "as it aims to stem its losses from bets on low-yield foreign bonds, a main cause of its deteriorating balance sheet, and lower the risks associated with holding foreign government bonds."
