A trip overseas

There is not much going on domestically this morning ahead of the US ISM report at 10am est and I'll just go over the goings on overseas. 

Tokyo said its core/core November CPI came in at up 3.6% y/o/y, one tenth less than expected and down from 3.8% in October. This is always a leading indicator for the national report out in a few weeks. Prices ex energy were up 2.3%, also one tenth under the forecast. The yen initially sold off on the report, as it would likely push out even further when the BoJ would exit NIRP but is now up slightly up on the day. JGB yields are a touch lower as is the 10 yr inflation breakeven which is down by 1.3 bps to 1.32%, though still near the highest level in 9 1/2 years. 

As we look to see how the macro unfolds in 2024, what the BoJ does with negative rate policy and its yield curve will again be key factors, just as it was in 2023 when they widened YCC. Same with Japan's appetite for US Treasuries, and whether it continues to shrink, notwithstanding the slight rise this year. I still attribute the 10 yr global yield spike beginning in late July was mostly due to the BoJ policy shift. Japanese stocks remain attractive and we are still long as we are on other Asian markets as well. 

10 yr Japan Inflation Breakeven

After the BoK did nothing last week with policy, South Korea reported its November CPI and it rose 3.0% y/o/y vs the estimate of 3.1% and down from 3.2% last month. The theme globally now is that outside of the BoJ, all central banks are on hold, though remain intent on shrinking their balance sheets for those that did so much to expand them over the last bunch of years.