Illustration: Aïda Amer/Axios

Bond yields are rising in the U.S. but falling in Europe as investors are betting on a new round of central bank policy divergence.

What's happening: Benchmark U.S. 10-year Treasury yields are holding near their highest since early June. Yields jumped after minutes from the Fed’s September policy meeting did not mention plans to shift quantitative easing bond purchases toward longer-dated maturities, which many investors had been pricing in for months.

Yes, but: European government bond yields have been declining in most countries, with the exception of the U.K., as investors bet a second wave of COVID-19 infections could move the European Central Bank to cut interest rates again (below their current -0.5%) or increase asset purchases for the third time this year.

  • ECB President Christine Lagarde warned this week that a second wave could undermine the eurozone’s economic recovery.

What to watch: The spread between yields on U.S. 10-year government debt and comparable German debt reached 129 basis points Thursday, its widest level since mid-March.

By the numbers: Spreads between German 10-year yields and other yields in Europe are narrowing, according to Tradeweb data.

  • The German-Italian 10-year spread contracted Thursday to its tightest since early 2018 with the spread between German and Portuguese, Greek and Spanish bonds all also tightening notably in recent days.

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Dion Rabouin, author of Markets
Oct 23, 2020 - Economy & Business

Turkish lira's crash shows the value of central bank confidence

Expand chart
Data: FactSet; Chart: Axios Visuals

The value of the Turkish lira against the dollar fell more than 2% immediately following the central bank's decision not to adjust its benchmark one-week repo rate, sending the currency plummeting to its lowest level on record.

Why it matters: Turkey is becoming a cautionary tale of what can happen when a central bank loses its independence and credibility and is effectively controlled by the president.

Updated 32 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Politics: The swing states where the pandemic is raging — Pence no longer expected to attend Barrett confirmation vote after COVID exposure.
  2. Health: 13 states set single-day case records last week — U.S. reports over 80,000 new cases for second consecutive day.
  3. Business: Where stimulus is needed most.
  4. Education: The dangerous instability of school re-openings.
  5. World: Restrictions grow across Europe.
  6. Media: Fox News president and several hosts advised to quarantine.
Ben Geman, author of Generate
2 hours ago - Energy & Environment

Japan's big new climate goal

Climate protest in Tokyo in November 2019. Photo: Carl Court/Getty Images

Japan's new prime minister said on Monday the nation will seek to become carbon neutral by 2050, a move that will require huge changes in its fossil fuel-heavy energy mix in order to succeed.

Why it matters: Japan is the world's fifth-largest source of carbon emissions. The new goal announced by Prime Minister Yoshihide Suga is stronger than the country's previous target of becoming carbon neutral as early as possible in the latter half of the century.