Yields rise, Nasdaq futures dip as Japan surprises with wider yield cap

Growth stocks were under pressure in premarket trading Tuesday as longer rates rose.

Nasdaq 100 futures (NDX:IND) -0.3% were the weakest, with S&P futures (SPX) -0.2% slightly lower and Dow futures (INDU) -0.1% off a bit.

The 10-year Treasury yield (US10Y) rose 8 basis points to 3.66% and the 30-year yield (US30Y) rose 10 basis points to 3.72% after the Bank of Japan unexpectedly widened its yield curve control, prompting a government debt selloff.

The BoJ boosted the leeway on the 10-year JGB yield to 0.5% from its target of 0%, up from the previous cap of 0.25%. The yen (FXY) surged 3.5% against the greenback.

Japan is changing policy because of inflation worries, strategist Jim Bianco tweeted, adding: “remind me why the Fed would be pivoting anytime in 2023?”

“The answer is they will not,” he said. “You can forget a pivot.”

Japan’s move is “widely seen as the beginning of a potential end to their ultra loose monetary policy,” Deutsche Bank’s Jim Reid said. “That policy has made them a big outlier compared to other central banks this year, having maintained rates at the zero lower bound whilst others embarked on their biggest tightening cycle in a generation.”

“Indeed, it’s important not to underestimate the impact this could have, because tighter BoJ policy would remove one of the last global anchors that’s helped to keep borrowing costs at low levels more broadly, “Reid said.

Before the bell, November housing starts and building permits figures arrive. Economists expect starts to dip to an annual rate of 1.4M with permits down to 1.485M.