JPMorgan's global market strategy team has found that the impact of the Japanese 10-year government bond yield is being more strongly transmitted to the US 10-year and 30-year Treasury yields. JPMorgan's US 10/30-year yield curve model, if only considering domestic US factors, shows a current curve steepening by approximately 10 basis points; after incorporating the Japanese 30-year government bond yield, the model's fit improved from 85.5% to 93.7%, and the standard error decreased from 7.6 basis points to 5.0 basis points, with the current curve also closer to fair pricing. During periods of negative interest rates and yield curve control, US Treasuries, hedged by currency exchange rates, were more attractive than Japanese Treasuries, leading to continuous Japanese capital outflows and helping to suppress long-term US yields; however, as Japanese long-term bond yields have risen, this force is reversing.
