Hawkish Fed talk meets a BOJ pushing for hikes — short long-dated Treasuries
Inflation came in hot in July and stays well above the Fed's comfort zone, keeping a September rate hike on the table — and now even Japan's central bank is publicly calling for higher rates. Two of the world's biggest central banks turning hawkish at once is bad news for bonds.
Idea
July's inflation reading ran hotter than the Fed wants and kept a September rate hike squarely on the table, with commentary suggesting policymakers now have fresh ammunition to tighten. On the same day, the Bank of Japan's deputy chief is publicly pushing for a 'timely' rate hike because of inflation risk there too. When both the Fed and the BOJ lean toward raising rates at once, government bond prices in both countries tend to fall as yields climb. Shorting long-dated US Treasury ETFs is a clean way to express a world where money is getting more expensive, not cheaper.