My Bui

BOJ tightening toward 1.75% and rising Japanese yields should support the yen, while the multi-year carry trade unwind likely has further to run. She expects the yen to have more upside, implying further unwinding of short-yen carry positions.

Long-term drivers such as aging demographics, populist policies, geopolitical risks, and government debt and spending will keep inflation and bond yields structurally higher through the decade. The 10-year Treasury yield can cross 5%, and the rise in term premium reflects eroding trust in US institutions and investor alternatives to US bonds. Near term, however, she thinks yields may correct because markets have priced three to four more Fed hikes, which she views as overdone, even as the long-term direction for yields remains up.