In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Yen Leads Rates Higher
The Japanese yen has been front and center, and for good reason. It won’t stop falling. Notice the strong relationship between the USD/JPY cross and the US 10-year yield illustrated in the overlay chart with a 26-day correlation study in the lower pane. Interestingly, this strong positive correlation all centers around the Bank of Japan’s effort to put a cap on interest rates. They achieve this by going into the open market to purchase Japanese Government bonds. As such, the BOJ has to reduce US Treasury purchases, and this is putting upward pressure on the US 10-year yield. As long as this remains their strategy, the strong relationship between these markets should hold.
