〔Day Digest〕German 30Y 3.7924% Since 2011, French 10Y 4.1503% From 2008 Highs as G7 War Bill Tops $16bn; Yen Back at 160 - Bessent Declines Fresh Joint Bid

0. Daily Arc

European long ends led the action — Germany's 30Y rose to 3.7924% (+3bp intraday), the highest since June 2011; France's 10Y hit 4.1503% (+2.5bp), the highest since November 2008; France's 2Y reached 3.1012% (+1.5bp), the highest since July 2024 ^[1][2][3]. The same factor pressuring G7 duration since February — the US-Iran war — has added ~$16bn in extra sovereign debt service, on track to ~$34bn by end-Q1 2027 if yields hold, with the US carrying ~$10.6bn of that ^[4]. Yen tested 160 again on dollar strength from Fed Chair Warsh's Jackson Hole 'hawkish' debut ^[5][6][7]; Treasury Secretary Bessent said the move is 'to a considerable extent under control' and signaled no new joint intervention, while declaring that 'Abenomics is finished' ^[5][6][7]. Oxford Economics' Shigeto Nagai now expects the BoJ to deliver three hikes (September 2026, December 2026, April 2027) to a 1.75% policy rate — faster than his prior path ^[8]. India let the RBI sell dollars to hold USD/INR at 95.4063 ^[9]; the rand stayed muted and the won held at 1374.10 after President Lee Jae-myung's cabinet reshuffle ^[10][11].

1. European Bond Rout

• **[ESCALATED] Germany 30Y at 3.7924%**, +3bp intraday, the highest since June 2011 ^[1]. The move extends a multi-week sell-off that a separate G7 analysis attributes to the post-February war duration unwind ^[4].
• **[ESCALATED] France 10Y at 4.1503%**, +2.5bp, the highest since November 2008, and France 2Y at 3.1012%**, +1.5bp, the highest since July 2024 ^[2][3]. Curve steepening is consistent with an inflation-and-supply premium, not pure Fed transmission.
• **[ESCALATED] G7 war tab:** an FT analysis (relayed via Chinese press) puts extra G7 sovereign debt service at ~$16bn since the US-Iran war began, projected at ~$34bn by end-Q1 2027 if yields persist; the US alone carries ~$10.6bn of the run-rate, set to rise to ~$21.7bn ^[4]. Jefferies Chief European Economist Mohit Kumar warned a 10Y UST break above 5% would hit equities and credit ^[4]. Single-source analysis; treat as one estimate.
• **[ONGOING] Background:** the 30Y UST sat at 5.271% mid-month after a one-day Treasury-buying bounce to 5.175%, with Treasury Secretary Bessent said ready to deploy TGA to repurchase long paper if needed ^[12]. The Europe/Germany lead is the focus; US numbers are context.

2. Yen at 160; Bessent Declines Fresh Joint Bid

• **[ESCALATED] USD/JPY at 160.11 intraday**, with a 160.2 high and a 159.613 afternoon pullback ^[5]. Direct trigger: Fed Chair Warsh's Jackson Hole debut, called 'the most explicit so far' that the next Fed move could be a hike; Warsh said US inflation remains above 2% and policymakers must be 'confident' of progress or 'there is still much work to do' ^[5][6][7]. Treat as background for the Japan story, not the lead.
• **[NEW] Treasury Secretary Bessent:** the recent yen move is 'to a considerable extent under control,' not the 'disorderly' condition that triggered the August joint intervention; he plans to meet BoJ Governor Ueda at this week's G20 finance ministers' meeting ^[5][6][7]. He also said BoJ 'will do the right thing' and that 'Abenomics is finished' ^[6][7]. Quote sparingly — these are the most consequential policy signals in the packet.
• **[ESCALATED] BoJ path — Oxford Economics' Shigeto Nagai** (former BoJ official): now sees three 25bp hikes — September 2026, December 2026, April 2027 — taking the policy rate to 1.75%, above his prior call of December 2026 and June 2027 ^[8]. He cites yen pressure and rising inflation expectations; 10Y JGB capped at 3% because the BoJ terminal rate won't reach the market-implied 'slightly above 2%' ^[8].
• **[ESCALATED] Japan food shock:** ~4,923 food items set to rise in September — ~3x year-ago, the first 4,000+ month since April 2025; October also tracking >3,000 ^[13]. Drivers: Middle East oil and record yen weakness feeding import costs ^[13].

3. Asia FX: India Defends, Won Pauses

• **[NEW] RBI intervention:** the Reserve Bank of India sold dollars onshore and offshore to support the rupee; USD/INR held at 95.4063, with 1-month NDDF down 0.2% to 95.64 ^[9]. Backdrop: Brent firmer after US strikes on Iranian rocket launchers, plus Fed hike concerns; India is a major oil importer ^[9]. Indian government bonds also slipped on Fed hike bets, with the benchmark trading at a discount ^[14][15][16].
• **[NEW] Korean won steady at 1374.10** (-0.1%) after President Lee Jae-myung's surprise cabinet reshuffle and a new finance minister nominee; the 13-month USD/KRW low of 1370.95 was set Friday ^[11]. 1-month implied vol rose to 10.133% from 9.945% ^[11]. 200/100/50-DMA at 1473.55/1478.67/1459.52 ^[11]. Busan Bank economist Lee Young Hwa sees Q3 USD/KRW topping at 1348 ^[11].
• **[ONGOING] South African rand muted** as a stronger dollar, softer metals and Fed rate concerns weigh ^[10].
• **[NEW] Asian currencies broadly consolidating**, with a WSJ warning they may weaken on growing Fed hike prospects ^[17]. **[NEW] EM stocks and currencies down** on the same Warsh-driven USD bid ^[18].

4. Other Cross-Currents

• **[NEW] RBNZ — JPMorgan economists:** expect a second consecutive 25bp hike at the September meeting, taking the OCR 25bp higher ^[19]. Single-house call.
• **[NEW] UK energy cap — Barclays analysts:** the Q4 Ofgem price-cap revision is not expected to disturb the UK CPI forecast ^[20]. Single-house call.
• **[ESCALATED] Europe heatwave:** Oxford Economics economist Tomas Dvorak estimates the heatwave will push euro-area food inflation +1-2pp and drag Q3 GDP ~0.2pp; Triodos puts the EU annual loss near €180bn (~1% of EU GDP); excess deaths >35,000 as of August 25, with the count covering only half the continent ^[21]. Germany, France, Spain combined >25,000; the JRC August 24 crop monitor flagged severe damage in western and central Europe ^[21]. Supply-side, not Fed.
• **[NEW] Trade frictions — CCPIT June reading:** global trade friction index 102, +2.4% y/y, +11.8% m/m; the US leads by value of friction measures for a seventh straight month; India, US, EU top the country index; electronics the top sector, followed by chemicals, pharma and machinery ^[22]. Routed through a Chinese-language press relay.

5. Source-Quality Notes

• Warsh's Jackson Hole specifics (the 'most explicit so far' framing, the 'still much work to do' line) circulate through Chinese-language relays ^[5][6][7]; fragments only — quote sparingly.
• The $16bn/$34bn G7 cost figure is FT analysis via a single Chinese press relay ^[4]; treat as one source, with the Jefferies 5% UST warning drawn from the same relay.
• Barclays' UK cap call ^[20] and JPMorgan's RBNZ call ^[19] are single-house.
• Bessent's 'under control' and 'Abenomics is finished' lines appear across three separate Chinese-language outlets ^[5][6][7] but in the same news cycle; consistent enough to quote directly.
• The RBNZ and RBA path items ^[19] are forecasts, not central-bank statements; treat as one bank's view.