GGMA Markets Briefing: Japan's 10-Year Yield Hits 3% as the Global Bond Selloff Deepens
The 10-year Japanese government bond yield reached 3.00% on our screens, a level last seen in 1996, as a global bond selloff drove yields to their highest in almost two decades. The two-year JGB added 5.4 basis points to 1.78%. Bloomberg's gauge of global sovereign debt rose for a fourth straight session to its highest since mid-2008, and Australian 10-year yields jumped 8.1 basis points to 5.17%, a level last seen in 2011 (BBG).
In stocks, the Hang Seng fell 0.90% to 25,224 while the Nikkei fell 0.14% to 66,360, the CSI 300 slipped 0.07%, and emerging-market equities outperformed, with the MSCI gauge up 0.95% (BBG). S&P 500 futures were near flat, off 0.02%, and Nasdaq futures fell 0.03%. JPMorgan's trading desk moved to what its head of US market intelligence Andrew Tyler called a "tactically cautious / neutral view", citing rate uncertainty, September seasonality and a momentum unwind in artificial-intelligence shares, while writing that "equity-market fundamentals remain strong, but near-term variables are likely to cause markets to chop sideways" (BBG).
Regarding central banks, NHK reported that Treasury Secretary Scott Bessent told Finance Minister Satsuki Katayama and Bank of Japan Governor Kazuo Ueda in separate meetings that Japan's next step should be to raise interest rates (BBG). Bessent told CNBC he has "information that the market doesn't have" and believes the Japanese government and central bank "will do the things that will lead to a stronger yen", adding on a rate rise that "I think the market's pricing that in now" (Nikkei). Katayama denied the exchange, saying decisions on monetary policy "are entrusted to the Bank of Japan under the BOJ Act", and framed the meeting around orderly currency moves and July's joint intervention instead (BBG). In the euro area, Governing Council member Olli Rehn told the Financial Times that a prolonged Middle East conflict could keep inflation elevated, called market pricing for a quarter-point increase "understandable", and said subsequent decisions should be made meeting by meeting (Breakingthenews). Robert Kaplan, a Goldman Sachs vice chair and former Dallas Fed president, told Bloomberg Television he would go into the September meeting "leaning into the thought of raising interest rates" (LS). Market pricing: STIR traders put a September Federal Reserve rise at 67%, the European Central Bank's 10 September move fully priced, a Bank of Japan increase on 18 September at 92%, tomorrow's RBNZ decision at 98%, and a Reserve Bank of Australia move on 29 September at 51%, while the Bank of Canada tomorrow and the Bank of England this month are both priced near 11%.
In currencies, the yen was little changed at 159.84 per dollar, having briefly firmed on the NHK report before giving it back after Katayama's denial (BBG). The dollar index rose 0.06% to 99.49 (BBG). The euro was steady at 1.1609 before the region's inflation reading, and the offshore yuan was little changed. The kiwi eased 0.07% to 0.5913 before tomorrow's Reserve Bank of New Zealand decision, where every economist surveyed expects a second consecutive increase (BBG). The rupee firmed 0.35%.
In bonds, the US 10-year yield rose 2.4 basis points to 4.77%, its highest since January 2025, with the two-year up 1.3 basis points to 4.35% and the 30-year up 2.3 basis points to 5.27%, all easing back as the Iranian headline crossed (BBG) (BBG). The long end has now settled above 5% on 55 days since January, the most in any year since 2006, and faces an expected $215 billion of corporate issuance this month set against the Treasury's buyback programme (BBG). "If you want to get the long end down, you tighten rates," said Gregory Faranello, head of US rates trading and strategy at AmeriVet Securities (BBG). Tuesday's 10-year JGB auction drew demand in line with its twelve-month average and better than the previous sale, but SMBC Nikko's Miki Den said it showed "investors are looking for a yield above 3% on 10-year JGBs", and a 30-year sale on Thursday is the harder test (BBG). Behind that auction sits the supply: ministries have requested a record 143 trillion yen for fiscal 2027 after the government dropped spending caps in strategic fields, leaving the bond market and Washington as the remaining constraints (Reuters) (Nikkei). Growth Strategy Minister Minoru Kiuchi urged that the number be compared with last year's combined initial and supplementary budgets rather than the initial one alone, and Prime Minister Sanae Takaichi has said new issuance will stay below 40 trillion yen (BBG).
In commodities, crude came off its highs, but is grinding higher again, after Iranian state television cited President Masoud Pezeshkian saying that if the United States returns to the memorandum of understanding, Iran will reciprocate, the first conciliatory signal from Tehran since the weekend strikes (LS). WTI held a 1.20% gain at $86.79 and Brent 0.88% at $91.29, both below their session peaks. The advance had followed a report from maritime authorities of a tanker struck by three projectiles while sailing out of the Strait of Hormuz, 17 nautical miles east of Khasab in Oman, with no casualties (Reuters via Arab News). President Trump dismissed the conflict as “a relatively little war for us” while vowing to respond to Iran's strikes on American bases in Jordan and the United Arab Emirates, and US Central Command said no ships had hit mines in the strait, contradicting Iranian claims (BBG). Gold turned higher, up 0.11% to $4,442, as the pullback in yields eased the pressure on the non-yielding metal (BBG). Copper added 0.69% and industrial metals rose 0.85% after the Chinese PMI survey (BBG). Venezuelan crude exports jumped 28% in August as Indian refiners more than doubled their purchases while cutting Russian volumes, the clearest sign yet that the response to Hormuz is re-routing rather than new supply (BBG). Bitcoin firmed 0.29% to 79,083 and ether rose 0.28% to 2,479 (BBG). Soybeans reached their highest in almost three years after the Environmental Protection Agency's biofuel exemption decision proved more supportive of demand than feared (BBG).
In corporate news, Anthropic signed a $35 billion cloud agreement with Nvidia-backed Lambda, with Nvidia itself holding the lease on the Texas data centre, following a $45 billion deal with Nscale earlier this month (WSJ). The Trump administration added nine drugmakers including Teva, Astellas and CSL to its Medicaid most-favoured-nation pricing programme, with the companies committing $19.6 billion of US manufacturing investment in exchange for relief from tariffs of as much as 100% on certain imported patented medicines (BBG).
In geopolitics, Bessent told Russian Finance Minister Anton Siluanov at the G20 that no sanctions relief is possible while the war in Ukraine continues, in Siluanov's first appearance since 2022; European officials declined to join the group photograph, which was taken without him (CNBC). Canada's retaliatory tariffs take effect on 8 September, and Oxford Economics estimates the combined measures cut output about 0.3% against its 2027 baseline, two days before a Bank of Canada decision at which a hold is expected (BBG).
Data and the day ahead: In Australia, Sydney home values are down about 7% from their February peak with prices falling in 93% of capital-city suburbs, and mortgage applications have dropped as much as 20% since the May budget restricted negative gearing (BBG). British shop prices rose 1.5% in August against 0.9% expected, from 0.9%, the fastest in more than two years with food up 2.8% (BBG). Japan's second-quarter capital spending rose 1.6% on the year against expectations for a 0.3% fall, from zero, and current profits jumped 24.6% against 15.2% expected, pointing to an upward revision to second-quarter GDP on 8 September (BBG). China's RatingDog manufacturing PMI rose to 51.5 against 51.0 expected, from 50.9, a ninth month of expansion and the longest run in five years (BBG). Japan's manufacturing PMI was 54.9 from 55.1, and consumer confidence was 35.5 against 35.3 expected, from 34.9. Australia's current-account deficit narrowed to A$27.2bn against A$30.0bn expected, and net exports contributed 0.1 point to second-quarter growth as expected, ahead of tomorrow's GDP. Still to come today: euro-area flash inflation at 11:00 CET, where the survey looks for the headline rate to accelerate on energy costs with core steady, the final price reading before the 9-10 September decision, alongside the unemployment rate. ECB Governing Council member Kocher speaks in Alpbach at 10:30 CET, Nagel in Asheville at 14:30 CET and Vujcic in Berlin at 17:30 CET, with Federal Reserve Governor Michael Barr at 15:05 CET. Then the US ISM manufacturing survey at 16:00 CET, seen easing slightly while holding in expansion, with JOLTS job openings and construction spending alongside it (LS). Later this week: the RBNZ and Bank of Canada decide tomorrow, Australian second-quarter GDP lands overnight, a 30-year JGB auction on Thursday, and the August US payrolls report closes the week on Friday (BBG) (BBG).
Time Stamp: 1 September 2026, 07:47 CET