Post-Thanksgiving trading saw selloff in Treasuries, with long end up most. 10-year yield rose to 4.1% this morning, up from 3.99% at the close before the holiday. Japanese bonds are also continuing to sell off, as 10-year yield hit its highest since 2008.
Today’s JGB 10-year auction brought some relief to the market after jitters regarding Japan mounting debt concerns. The auction saw a bid-to-cover ratio of 3.59, higher than the previous offering in November, as elevated yields lured buyers despite rising expectations for a near-term BOJ rate hike. The yield on the 10-year JGB is now trading to its highest in 17 years! USD/JPY and interest rate differentials remain stubbornly deanchored (Figure 1).
In the UK, OBR chair Richard Hughes quit after the “inadvertent” leak of November 26 Budget forecasts. London struck a deal with Washington to keep US pharma tariffs at 0% for three years, though the UK will pay more for medicines via the NHS. Shop-price inflation cooled to 0.6% YoY in November (from 1%) thanks to early Black Friday discounting. Starmer says the UK will be more pro-business toward China but won’t trade security for market access.
Europe remains Ukraine-focused: the EU says Belgium’s concerns over the €140bn Ukraine loan can be managed, while Zelensky reiterated that sovereignty and security guarantees are non-negotiable and territorial concessions off the table. Macron says a peace deal is still “far off”. The EU may also delay its review of the 2035 combustion-engine ban.
US manufacturing is stuck in contraction, with ISM warning trade uncertainty “kills us”, while Washington approved up to $150mn subsidy for chip start-up xLight. Canada is set to join the EU’s €150bn defence procurement fund.
China’s Vanke rattled markets again with fresh debt-delay details, while the PBOC drained CNY145.8bn net via OMO and fixed the yuan at 7.0794. China’s onshore yuan reaches its strongest close since 11 October.
Precious metals pull back from their highs, with silver down 1.5% this morning, now below $58/oz. Gold down less, trading just above $4.2k/oz. Crypto keeps crashing, as Bitcoin dropped to under $84k yesterday (figure 2) and Ethereum is now below $3k. As a whole, the crypto market saw nearly $1bn in leveraged longs liquidated on Monday, Korea CPI stayed at 2.4% YoY, and Japanese markets priced an 80% chance of a December BoJ hike.
Data today: Euro inflation
