Watching JGB auction results is a thing, again/One says 'Business sucks', another 'We had our best month in two years'

We learned again today that watching the results of Japanese bond auctions is a new thing we need to monitor because what happens there influences what happens here. The 40 yr JGB auction was not good. The bid to cover was just 2.21 vs 2.92 in the auction before and the lowest since July 2024. The 5 yr average is 2.54. Luckily yesterday's news on talk of a cut to long term JGB issuance cooled things down as the 40 yr yield rose just 3.3 bps in response to the weak auction. The 10 yr JGB yield rose by 4.5 bps, gaining back what it lost yesterday. Again, something to watch because European bonds are lower as are Treasuries following the JGB move.

By the way, BoJ Governor Kazuo Ueda was in front of the Japanese parliament and commented on what is going on in the JGB market but didn't say much in terms of substance. "If super long-term interest rates fluctuate significantly, we will keep in mind the possibility that such fluctuations could affect long-term or even short to medium term interest rates." It's not clear though at what level the BoJ steps in if this JGB selloff continues but on a mark to market basis, the BoJ is taking some big losses on its existing holdings.

40 yr JGB Yield

The helpful thing about going through the Dallas manufacturing index is not the headline figure, nor the very volatile internals but what companies in a variety of industries are saying themselves. Again, the May report was littered with tariff talk and I bolded for emphasis some things that stood out. By the way, the index was -15.3. It's been above zero just twice since early 2022 and those two months came right after the election.