Tiptoeing into the tetons: Rally loses altitude as yields bite back

From hopium to headwinds: Markets stumble into Powell’s sermon

Markets are tiptoeing into Jackson Hole day, wobbling after a pentad of down days with rates traders looking over their shoulder at last week’s hot PPI — the first crack of thunder that tariffs aren’t abstract politics but inflation grenades rolling under the table. That print alone was enough to rattle doves. But Thursday’s US PMI data wasn’t just a less dovish follow-through; it was a hawkish hammer blow: 53.3, the strongest in three years, a steel-toed kick that drove Treasury yields higher and shoved September cut odds off their 80% perch into the low 70s. Suddenly, the summertime rally that has been built on rate-cut hopium balloons is starting to lose both air and altitude.

The S&P is now limping through its longest losing streak since January, five straight days of bleeding. It’s not panic — yet — but it is erosion, conviction slipping grain by grain through the hourglass. Tech, the crown jewel of 2025’s rally, is catching the sharpest downdraft. Mega-caps are down five days running, dragging the cap-weighted S&P with them, while the equal-weight index sits flat, a reminder that the AI boom lifted giants but left the rest of the market trudging. Now gravity is pulling back the very names that inflated the rally.

And those AI valuations? They’re flashing bubble all over again. $2.7 trillion of unicorns running on an upside-down P&L where every $1 of revenue translates into $25 of costs funneled through hyperscalers and GPU makers. That’s not innovation; that’s a bonfire waiting for a spark.

Retail earnings added no relief. Walmart’s sales beat was buried under its CFO’s blunt warning: tariffs will chew into margins in the back half of the year. That’s the boardroom chorus now — costs rising, tariff elephants stomping, guidance slipping.

Treasury yields told the story loudest. The 10Y settled at 4.325% and the dollar is grinding higher. USDJPY hit a ten-day peak. Crypto rolled over too, with bitcoin and ether leaking lower, sniffing out a less-dovish tone. This feels like more than just position-squaring into Powell — it’s not the tidy housekeeping you see before a big event. It’s the market shifting furniture, knocking pieces off the chessboard, a signal that traders aren’t playing from the uber dovish playbook anymore.

And in the background, Japan is knocking at the global macro door. Thirty-year JGB yields are pressing the ceiling for the third time — and if Tokyo lore holds true, the third test breaks the dam. That would send ripples across every asset class from currencies to credit.

So now all eyes turn to Powell’s Jackson Hole address — his eighth and final sermon in the Tetons. The room will want legacy, independence, maybe even a framework tweak, but the market only cares about one thing: does he validate September cuts, or not? After the hawkish hammer blows of PPI and PMI, the bar for dovish rhetoric is higher, conviction is thinner, and anything short of clear guidance risks turning this five-day drip into a summer sandstorm rolling down the mountain.

Japan’s bond market loses its grip: Yields break free, global ripples begin

Japanese government bonds just took another lurch higher, with yields hitting levels not seen since the late 2000s after a weak auction rattled the market’s nerves. The 10-year JGB briefly spiked to 1.61%, a high-water mark last touched in 2008, while the 20-year yield climbed to 2.655%, a level that belongs to another era — back in 1999. The catalyst was a soft bid-to-cover at the 20-year auction, sliding to 3.09 from 3.15 in July, a subtle shift on paper but a glaring signal that demand for duration isn’t what it used to be. Investors, already edgy about a potential BoJ rate hike, simply didn’t line up in force, and the market buckled under the absence of sponsorship.

This is more than just a one-off auction wobble; it’s the sound of the tectonic plates shifting under Japan’s $9 trillion government bond market. For decades, JGBs were the bedrock of global carry — anchored by the BoJ’s iron grip on yields. Now, with each weak auction, cracks appear in that foundation, and yields keep grinding higher. Demand at the long end is fading, suggesting the market doesn’t yet believe these levels are worth the risk. And when Tokyo sneezes, global bond markets catch a chill. The jump in JGB yields is a reminder that even the faintest whiff of BoJ normalization can ripple outward, nudging up global yields and unsettling fixed-income portfolios from Frankfurt to New York.

The bigger picture is a policy regime in transition. Japan is slowly backing away from its ultra-easy stance, but the BoJ faces a treacherous balancing act: tighten too fast and risk destabilizing a heavily indebted government balance sheet; move too slow and risk losing credibility as inflation dynamics shift. Either way, the era of painless JGB stability is over, and the volatility bleeding out of Tokyo is a warning shot to every global macro trader — what happens in Japan’s bond market doesn’t stay in Japan.