Rates Rise Ahead of Potential BoJ Hawkishness

Rates move higher across the curve today ahead of BoJ decision. Treasury yields were up today, the 2-year yield rising ~8bps to 4.26% and the 10-year rising ~10bps to 3.58%. Longer-dated Treasuries led the selloff, driving a steepening in the 2/10 year spread to ~68bps. The moves come ahead of a potential hawkish Bank of Japan pivot. Markets have speculated that officials may seek to add flexibility to the nation’s 2% inflation goal. Tech stocks drove a decline in equities, with the NASDAQ down ~1.50% and the S&P500 down 0.90%.

U.K. Gilts decline ahead of potential supply surge. U.K. bond yields rose today following an announcement from the BoE that they will sell short-maturity notes starting January 9^th, 2023. Additionally, the UK’s gross financing is expected to increase 50% over the next 4 years, which will likely drive gilt supply in 2023 to record highs. The 10-year Gilt yield ended the day up ~17bps to 3.5%.