Yields/The BoJ debate/PMIs remain soft/Company comments

We learned yesterday that the round number of 5% is one line in the sand with regards to the buying interest in the 10 yr Treasury note and just maybe we have a respite, even temporarily, in the relentless rise in long term rates. While I think the 10 yr yield will continue to surprise us to the upside, maybe yesterday was at least a short term top. So, what have we learned over the last few months? Are long term Treasuries a geopolitical safety trade still? No, as we've seen over the past two weeks after the attacks on Israel, and certainly not after the Russian invasion of Ukraine in February 2022. Are long term Treasuries a bet on faster economic growth, ahead of the GDP print? Maybe, but UK, German and Italian bonds are not selling off with yields rising because of quicker growth in Europe, which in fact is slower further (see the weak PMI info below). Are yields rising because of QT? It's definitely a factor I believe and certainly there has proven to be a tight relationship with every move in JGB yields and shifting BoJ policy (see chart below). Are yields rising because of the rising US debts and budget deficit? Very likely but it's just one piece of the puzzle and not the only reason. 

By the way, the real safety trade are 2 yr Treasuries with the Fed about done raising rates as you know your downside risk, unlike the 10 yr. There is not as much beta but does the job.

A reminder with this chart, it was on July 28th, and hinted at a few days before that, of the further widening of YCC by the BoJ, and the BoJ overnight again intervened and bought JGB's in an unscheduled operation:

US 10 yr yield in orange, JGB 10 yr yield in white

With regards to the BoJ meeting next week, we heard from some 'people familiar with the matter,' whoever might that be. Bloomberg today is reporting, "BoJ's Decision on Yield Curve control Set to Go Down to the Wire." The piece said "BoJ officials are likely to monitor bond yield movements until the last minute before making a decision on whether to adjust the YCC program at a policy meeting next week, according to people familiar with the matter."