Which macro events drove risk off?

TLDR

Risk-off over the past week was driven by rising global yields, event risk around US inflation and a Fed decision, and a potential Bank of Japan hike that tightened global financial conditions.

1. Global bond yields hit multi?year highs, pressuring duration?sensitive assets and sentiment global bond yields hit 16?year highs.
2. Markets de?risked ahead of US CPI, jobs and a Fed decision, repricing rate?cut timelines investors on edge ahead of data and meetings.
3. A possible BOJ rate hike and stronger yen signaled less global liquidity support BOJ to take rates to 30?year high.

Deep Dive

1. Yield Spike

A jump in long?dated government yields to the highest levels in years tightened financial conditions and dulled appetite for high?beta assets. A global index of long bonds rose to 16?year highs, framing a disappointment trade as easing hopes faded and fiscal concerns lingered global bond yields hit 16?year highs. In the US, the 10?year hovered above levels that often unsettle equities, with media highlighting yields near multi?month highs during the week market wrap noted higher yields.

2. CPI and Fed Jitters

Positioning tightened ahead of a cluster of US releases (jobs, CPI) and a Fed decision, creating a mini reset of the macro narrative and potential quick repricing of rates investors on edge ahead of data and meetings. The CPI release itself sat at the center of market focus, with calendars highlighting it as the pivotal event of the week CPI release timing. In parallel, commentary stressed that while the Fed cut rates, forward guidance and the risk of a hawkish cut mattered more for risk assets policy uncertainty and guidance focus.

3. BOJ and Dollar Cross?Currents

Prospects of the Bank of Japan hiking to a 30?year high lifted the yen and signaled less global policy accommodation, adding to risk aversion BOJ to take rates to 30?year high. Dollar dynamics also sat in flux around jobs and CPI, with traders weighing how a softer or firmer DXY would flow through to liquidity and crypto US dollar setup around data.

Conclusion

The risk?off tone stemmed from tighter global rates and event risk: yields reset higher, CPI and Fed guidance loomed, and a potential BOJ hike pointed to less policy cushion. If yields cool and CPI cooperates, risk appetite could stabilize; if inflation surprises or policy turns more hawkish, de?risking likely persists.