1. UST Rally – Made in Japan?
2. Macro Gravity – XHB vs XLF
3. Cockroach Watch
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1.UST rally – made in Japan?
Japan is exporting lower yields to the US but Treasuries have now overshot macro fair value.
The UST rally isn’t domestic; it’s imported from Japan.
Qi’s custom ST model for 10y UST yields including 30y JGB yields has 73% confidence and shows JGBs as the second-largest positive driver. The ~50bp collapse in JGB yields has been instrumental in dragging Treasury yields lower.
Fair value sits at 4.11% versus 4.24% on our core model. So the Japan influence is very real but, even so, spot has still overshot by ~7bp.
Continue reading our analysis on the other headlines by downloading the PDF below
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