Eurodollar University Something Weird Is Happening in Japan’s Bond Market
Jul 28, 2025
Steve Van Metre, a market analysis and monetary policy expert, dives into the peculiarities of Japan's bond market, highlighting the rising long-term yields and central bank uncertainties. He explores how similar patterns are emerging in U.S. dollar forward markets, raising questions about interest rate expectations amidst economic ambiguity. The conversation touches on labor market challenges, corporate pressures, and the reactions of businesses to economic signals, providing insight into the complexities shaping global financial landscapes.
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Bank of Japan Spurs Market Uncertainty
- The Bank of Japan is the greatest source of uncertainty in Japan's bond market, creating volatility and unpredictability.
- Central banks globally, intended as stability anchors, are instead major sources of market uncertainty.
Markets Uncertain on Fed Timing
- US dollar forward markets like term SOFR futures also show uncertainty about when central banks will change course on inflation.
- Markets predict rate cuts, but timing and conditions remain unclear due to central bankers' inflation focus.
Labor Market's Role in Fed Policy
- The labor market is a critical point for monetary policy, with the Fed balancing inflation control and labor market management with the same tools.
- Despite downward inflation trends, the Fed hesitates to act due to labor market strength and inflation expectation risks.