Daily Market Color October 30, 2023US, Japan Central Banks Stir Markets Swap rates rise as Treasury borrowing estimates highlight the session. Swap rates and UST yields rose across the curve to kick off FOMC week, which saw the 2y yield extend its gains over 5% and the 10y yield close just ~10bps from 5%. The price action came with US and Japan central banks in the headlines, the former announcing a cut in borrowing estimates while the latter mulled a change to yield curve control policies. Meanwhile, the continued war in the Middle East contributed to more volatility in the oil market, which saw crude fall on the day and settle below $83 per barrel. Bank of Japan considers letting 10-year yield exceed 1%. The Bank of Japan’s policy meeting ends tomorrow, and policymakers are reported to be mulling a tweak to their yield curve control policy that would allow the 10-year Japanese bond yield to temporarily rise above 1%. The move could support the Yen, the world’s worst performing major currency, by reducing the difference between Japanese and U.S. long-term yields. Immediately following the news, the Yen strengthened against the dollar, falling below 149 for the first time in two weeks. Treasury borrowing amounts released. The US Treasury announced a reduction in borrowing estimates for the current quarter, a flip from data that has shown rising fiscal deficits and an August announcement of increased UST sales. The updated Q4 estimate is $776 billion from $852 billion forecasted in July, a sharp decline but still the record borrowing amount for a calendar Q4. Meanwhile, Wednesday’s quarterly refunding announcement will be widely scrutinized, where any increased supply projections could force a continued sell-off for long-term USTs.