Matsuzawa Morning Report

Research evidence excerpt

Matsuzawa Morning Report

Global Markets Research

23 June 2026Matsuzawa Morning Report

Macro Strategy - Japan

Why is the market moving to price in a Fed rate hike in July? Research Analysts

Strategy

Warsh's criticism of Fed's past decisions has had a boomerang effect Naka Matsuzawa - NSC

naka.matsuzawa@nomura.com

-Ifthiswereanormalratehikedecision,thelikelihoodofaJulyhikewouldbequitelow, +81 3 6703 3864

butifitisan“insurancehike”,thecasefordoingitisstrongernow,whileoilpricesare

high.

-WarshhasrepeatedlycriticizedtheFedforfallingbehindthemarketinits2022–2023

ratehikes.Itisunclearwhetherhecanrestrainthehawksundersimilarcurrent

circumstances.

-Thepayrollgainsandtheunemploymentrateintheemploymentreportareinconsistent;

oneofthemislikelytoconvergetowardtheothersoon,potentiallyinfluencingtherate

hikedecision.

-Ifpayrollgrowthslows,ratesmayremainonholdthroughyear-endandthe10yrUST

yieldmaystabilizearound4.50%.Iftheunemploymentratedeclines,anearlyratehike

couldbring5.00%intoviewforthe10yrUSTyield.

Today's Japanese market

In Japanese markets on Tuesday, this author expects bonds to continue falling and

equities to prove solid (in overnight futures trading, bonds fell 19 sen and equities were up

JPY230, respectively, over OSE). In overseas markets on Monday, US bonds were sold

off and US equities lost traction. In the US bond market, rate hike expectations rose and

the market nearly fully priced in one rate hike by September. Real yields rose, while US

inflation expectations fell yesterday along with oil prices (Figure 1), suggesting that

expectations for an economic recovery and concerns about large corporate bond issuance

were the main drivers of the move in USTs. In the US stock market, cyclicals were solid

across the board, but some tech names softened.