It looks like the bond market is justifying yesterday’s move in FX as yields now rise after a few weeks of contemplation, with 10-year Treasury yields knocking furiously on the door of its 100-day moving average (red line) . The key level sits today at 2.90% and we are now starting to see yields climb above it.
Surprising German producer price figures earlier in the day did not help, reigniting inflation concerns as energy prices in Europe’s biggest economy more than doubled in July. To make matters worse, winter is approaching and that does not bode well for the outlook.
Coming back to bond yield developments, this provides further upward momentum for USD/JPY as the pair now extends its gains 0.5% to 136.58 at the day’s high.