With still no further clarity on Bank of Japan’s new policy framework of Yield Curve Control, and currency and cash bond markets out of sync, Weston Nakamura examines market price action and activity on US and Japan rates through the lens of futures markets, in order to determine if cross asset market behavior is normalizing.

Weston also notes the schedule for this week, in which there will be 30-year auctions held in both the Japanese Government Bond market, as well as the US Treasury market, within 2 days of one another. Given the respective policy setups for US debt issuance and Bank of Japan YCC, there may be competition for investors’ capital playing out at these long-dated bond auctions.

Finally, Weston offers a potential theory as to why Fitch Ratings had suddenly downgraded their credit rating of US debt, while subsequently publishing positive commentary on Japan’s credit risk in light of the Bank of Japan’s surprise jump in interest rates - which largely went unnoticed. In doing so, Weston dives into the very active world of of yen-denominated foreign bond issuance, in which global corporates and sovereigns have been rushing in to Japan in order to tap the last bastion of cheap money left.

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