Fiscal concerns in Japan are pushing up global 30-year rates, and it’s unclear if offsetting factors will emerge. The US 3-year auction on Tuesday was tolerable, but the 10-year auction on Wednesday will be more telling. Structural forces are not favoring longer-dated bonds, making it difficult to see a halt in the upward momentum of 30Y global rates.
US Treasury Secretary Scott Bessent has no immediate plans to ease issuance pressure, which is already affecting cash balances and reserves. The tariff-induced spike in inflation could worsen long-term interest rates. Tuesday’s 3-year auction was not great, but Wednesday’s 10-year auction will be more telling.
Long-end bond yields are rising due to fiscal concerns and quantitative tightening. Structural forces are not in favor of longer-dated bonds, with the US and UK contributing to market worries. European bond auctions have seen good demand so far this week, with a €9bn EU deal being oversubscribed.
Wednesday’s events include the FOMC meeting minutes from June and speakers discussing monetary policy. The US will auction 10-year notes on Thursday, which could further impact long-term interest rates.
Source: https://think.ing.com/articles/rates-spark-fiscal-fears-everywhere