The US-China bond yield gap is about to hit all time high.
The US 10-year yield hit 4.81%, its highest in nearly 3 years, while China's stayed flat at 1.69%, pushing the gap to 312 basis points. The Fed is fighting inflation with higher rates while China is fighting slow growth with lower rates, and that split is what's driving the gap wider. Source: Bull Theory Activate to view larger image,
Bessent’s bond-market victory didn’t last long. US 30y yields are back at 5.27%, wiping out the gains from Treasury’s surprise buyback expansion.
And the selloff is global: UK 5.86%, Japan 4.18%, Germany 3.82%. Message from bond vigilantes: deficits + inflation > intervention. Source: HolgerZ, Bloomberg
The gap between the SPX and the inverted US 10-year yield is getting very wide. The obvious question is how far the 10-year can move before it starts spilling over into equities.
Source: TME
US efforts to contain the rise in long -term yields face two major obstacles
(i) once you draw a line in the sand, markets will test you; (ii) global long-term yields are rising, which inexorably drags up US long-term yields no matter what the US does... Source: Robin Brooks
Japan’s bond market has crossed a historic threshold
The 10-year JGB yield has hit 3% for the first time since 1996—doubling from roughly 1.5% in just 12 months. But the bigger story is who now sets the price. Foreign investors account for around 66% of monthly JGB trading volume, up from only 12% in 2009, as the Bank of Japan retreats from negative rates and massive bond purchases. Markets are responding: • A 92% probability of a BOJ rate hike by September • An October increase already more than fully priced in • Record debt-servicing costs of ¥36.6 trillion—around $230 billion—budgeted for the next fiscal year, up 17% For decades, the BOJ dominated Japan’s bond market. Now, market forces are taking control—and the cost of financing the world’s most indebted major economy is rising fast. Investors, not the BOJ, are increasingly setting the price of Japanese debt. Source: Global Markets Investor, Bloomberg
Global sovereign bond yields (in aggregate) hit their highest since 2007
Source: zerohedge
A lost decade in bonds well under way
Source: Global_Macro
Stocks are now outperforming Bonds over the last 10 years by the largest margin in 66 years
Source: Topdown Charts, LSEG
