观点

(original Japanese report issued on October 16, 2026) The 10-year JGB yield is likely to enter a period of consolidation in the week of October 19 following a sharp decline the previous week.

After hitting an intraday high of 3.115% on September 25, the 10-year yield turned lower last week, quickly breaking below the 3% threshold.

Forecast range (intraday basis): 10-year JGB yield: 2.850%– 3.000% 30-year JGB yield: 3.850%– 4.050% Key events The Ministry of Finance plans to offer JPY700 billion in 20-year JGBs on October 20.

Bond yields fell despite a hotter-than-expected US inflation report mid-week.

For now, a lack of will to make unpleasant but needed choices is likely to keep spreads over Bunds on a path towards testing recent intraday highs, with the 10y spread at 158bp.

And lately, the message from the 2-year US Treasury yield has been hard to miss.

We discuss the upcoming dealer survey and what the long- term impact on rates could be ifthe Treasury adjusts 20yr issuance.

ACROSS THE AMERICAS 4 US Rates Strategy Treasuries staged an impressive rally this week in the face of bad inflation data and asilent Warsh, with the market trading well inthe face of negative news for the first time inmonths.

Credit Market Updates Market Commentary: • The SGD SORA OIS curve traded lower yesterday; shorter tenors traded 2-4bps lower, belly tenors traded 5-6bps lower, and 10Y tenor traded 6bps lower.

10- year bond yields are some 70 basis points higher, which, taken together, will push up debt interest spending by £11bn/year by 2029/30.

That opens up a classic trick from the Treasury, which is to leave spending plans virtually unchanged in nominal terms, setting up substantially smaller real-terms budget increases across the medium term.

The big takeaway this week has been the recovery of the long-end of the US Treasury market, even as inflation data continues to come in hot.

Were the tech sell-off to gain momentum, that Treasury buying would move to the shorter end of the curve.

More in our Commodity News, Analysis & Commentary • US treasury yields fell sharply Thursday despite on the strong bid for treasuries despite Wednesday’s hot US September CPI number, finding a low intraday Thursday around the release of a higher than expected PPI (see above).

They discuss the broadening of inflation pressures, the jump in Treasury yields, and why investors may need to remain focused on quality as higher rates pressure more interest-rate-sensitive companies.

The sharp reversal in Treasuries led by the long-end after the hotter-than-expected CPI print (Figure 1), raises the possibility that the 10y yields have seen their highs for now.

Similarly, there is no sign of funding market stress or a pile up of Treasuries on dealer balance sheets as investors attempt to sell their most liquid holdings to raise cash against their high yield holdings.

Overall, we wonder if it might be harder for 10y yields to rise much further if the markets remain as focused on the tightening in financial conditions since August (Figure 2).

But while 10y yields have risen, equities have continued to rally so the relative, economy-wide tightening in financial conditions has been modest.

This suggests to us that Treasury yields should decline from their current levels as markets scale back their expectations, leaving scope for capital gains in bonds.

The latest Treasury rally underscores how high-quality bonds can help stabilize portfolios by providing diversification when risk assets come under pressure.

1 Asia FX Talk │16 October 2026 Asia FX Talk Risk-off rally in Treasuries 16 October 2026 Market Highlights The US 2-year Treasury yield fell sharply to the 4.7% level as the technology-led equity selloff drove demand for safety, reversing all the initial post-CPI rise in rates.

Fed Vice Chair Bowman’s patient policy stance reinforced the decline in short - end Treasury yields as the technology-led equity selloff intensified.

Treasuries remained higher following the release, suggesting that concerns surrounding the technology selloff continued to outweigh the immediate inflation surprise.

The associated flight to safety has also supported US Treasuries and lowered US yields, and the week ahead will test whether this represents a temporary position adjustment or a more persistent reassessment of the AI investment cycle.

This combination strengthened the case for further monetary tightening in several major economies, with higher bond yields weighing on equity valuations even as earnings prospects improved.

Robust and better-than-expected second-quarter earnings and solid economic data were countered by a sharp rise in US Treasury yields, technology sector volatility, and anxiety about higher interest rates amid stubbornly high inflation.

In the US, fiscal concerns have been more of a sub-plot, though the Treasury’s efforts to hold down long yields have arguably only drawn more attention to them.

Since the previous Market Outlook was published, 10-year benchmarks have risen 27bps for US Treasuries, to be well above the 5% threshold, and 40bps for French bonds.

Earlier in the selloff, higher bond yields were themselves a source of pressure on equities.

However, a sustained Treasury rally is not guaranteed.

• Rate volatility moved the other way, MOVE 2.01% lower at 99.07, leaving equity and Treasury options markets priced for different readings of the same CPI.

• Treasury yields reverse sharply: A hotter-than-expected US inflation report initially sent yields soaring before a dramatic reversal pushed them below pre-CPI levels.

Treasury yields surged as investors reassessed the outlook for Federal Reserve policy, with the two-year yield briefly rising 16 basis points and the ten-year yield jumping 12 basis points.

As risk sentiment deteriorated, investors rushed back into Treasuries, triggering a dramatic reversal that erased the initial yield spike and pushed yields below their pre-CPI levels.

The reversal was likely amplified by short covering following a prolonged period of selling in Treasuries, which had left positioning increasingly stretched.

For much of the recent equity rally, falling bond yields have provided support for growth stocks, particularly technology companies whose elevated valuations depend heavily on expectations of future earnings.

Technology stocks failed to recover despite the sharp decline in Treasury yields, suggesting investors may increasingly be questioning earnings expectations, stretched valuations and the enormous capital expenditure commitments supporting the artificial intelligence investment boom.

While the macro picture doesn't provide any new arguments for changing the monetary policy stance at the October meeting, the surge in bond yields and the fiscal situation in France will be top of mind at the ECB.

But it’s more likely that such an action would require a bad pain trade first for Treasuries to trigger such action.

Given that rising bond yields typically boost bank income, the recent moves should have ideally provided a strong tailwind.

While higher bond yields can support bank revenues, several competing factors also create downside risks.

Many of them were local Hong Kong bank treasuries, eager to buy short-term paper with their surplus liquidity.

The US government is working against housing affordability in the US by a) driving up raw materials costs like tariffs on lumber, b) pursuing fiscal policies that raise bond yields and mortgage rates, and c) by pursuing overly restrictive immigration policy.

Residential construction may also gradually feel the impact of higher bond yields.

We still expect one more European Central Bank rate hike, although higher bond yields are already doing much of the ECB’s work.