So much for the intervention.
The yen has resumed its assault on the dollar, and is trading even higher than it was before the
Bank of Japan
intervened in the currency market to weaken it on
And in the absence of any fresh domestic economic data, the dollar's weakness has center stage in the Treasury market this morning, weighing on prices and sending yields higher.
The benchmark 30-year bond was lately 9/32 lower in price at 100 28/32, lifting its yield 2 basis points to 6.06%. Shorter-maturity note yields were higher by roughly similar amounts.
On Friday, the Bank of Japan spent an estimated $2 billion to weaken the yen by buying dollars, and the intervention helped lift the dollar to 108.83 yen from 108.03 on Thursday. Today, it is at 106.30, a three-year low, as currency traders scoff at the potential for additional intervention.
The yen is strengthening because investors believe that the Japanese economy has turned the corner out of recession, but a strengthening yen imperils Japan's recovery by making its products more expensive abroad. At the same time, a weakening dollar is negative for U.S. bonds because it discourages foreign investment in them, and stokes inflation by lifting the prices of imports to the U.S.
"There are two things going on that are sort of negative for Treasuries," said John Burgess, global head of structured fixed-income for
Deutsche Bank Asset Management
in London. "One is strength in the yen and the other is the reason for strength in the yen -- perceived stronger growth coming out of Japan, and the same thing in Europe. The more we have the global growth theme coming out of the market, it's negative for Treasuries and for rates globally."
In the panoply of stats the makers of U.S. monetary policy have to consider, wage growth remains paramount, since "that's where there's the least slack in the system," Burgess said, alluding to the fact that the unemployment rate stands at a 29-year low of 4.2%. But to the extent that global demand is rebounding, creating competition for goods that U.S. consumers want, the
also has to pay attention to what's happening abroad, he said.
Ahead for Treasuries this week, most significantly, are the
report on Tuesday and the
Consumer Price Index
on Wednesday, both for August.