Tension between the Australian government and the Reserve Bank of Australia will surface publicly when RBA leadership appears before a parliamentary committee on Friday. The bank has repeatedly warned inflation is proving persistent. The RBA deputy governor recently said the public is “angry” about high inflation and that “wherever I go, all I hear is cost, cost, cost; inflation, inflation, inflation.” Those remarks may be read as a critique of heavy government spending.

Japanese long-term government bond yields rose as markets priced faster Bank of Japan tightening. Strong US consumer inflation data last Friday lifted US Treasury yields and pushed Japanese yields higher. Investors are focused on Fed and Bank of Japan policy meetings later this week and monitoring Iran tensions and energy prices. The 10-year JGB yield rose 0.5 bps intraday to 2.990%.

China International Capital Co said the Fed should raise rates in September to preserve its credibility, calling that the decisive factor for policy. The firm said July FOMC member Waller’s deliberate ambiguity confused markets and helped push the US Treasury term premium from 0.65% at end-July to 0.9% by mid-August, forcing hawkish language at Jackson Hole. While softer data would have given the Fed room to wait, successive stronger-than-expected nonfarm payrolls and inflation have increasingly cornered policymakers. The report warned that if the Fed again refrains from hiking, markets may view prior hawkish signals as hollow, risking a deeper credibility crisis and loss of control in the Treasury market.