Bonds slump again, yen rate check adds intrigue after BOJ

Markets:

• Gold up $41 to $4381
• US 10-year yields up 6 bps to 5.01%
• WTI crude oil down $1.66 to $95.56
• AUD leads, JPY lags
• US stocks finish flat
• Bitcoin up 6%

The newsflow in North America was fairly light, but the market moves were anything but. Attention remained on bonds in the wake of the FOMC decision, with the tug-of-war continuing as yields pushed back close to 19-year highs. The front end stepped up once more, with 2s at 4.75%, the highest since 2024, and close enough to 10s to start considering yield curve inversion if the Fed meets the 2-3 further rate hikes priced in.

The pressure on the short end helped lift USD/JPY, but that ran into trouble at a high of 158.05. That's when the BOJ did a rate check, according to a Nikkei report. The BOJ hiked rates earlier, but the 7-2 vote suggested it might be done sooner rather than later. Japanese stock markets also put in a strong day.

Elsewhere in FX, the moves were modest with commodity currencies and the euro largely flat on the day. The pound rebounded from the BOE decision but that came after six days of selling.

Gold found some buyers despite rising yields in a breakdown of the usual correlation, a positive sign.

More impressive was bitcoin up 6% to $81K and ethereum up 7%. Bitcoin withstood the Clarity Act mess and some think it's not dead, but the reaction could also indicate underlying demand waiting for the dust to settle. It's impressive in any case as Clarity Act headlines are now an upside risk.

Have a great weekend.