〔Day Digest〕ECB 25bp Thursday Locked as Bund 10Y Hits 15-Year High 3.400% and Yen Pushes Through 153 — Terminal Rate, BOJ Path, and Carry Unwind Now Decide

0. Weekly Arc

The European rate complex seized the spotlight: swap markets price a 25bp ECB hike Thursday with 49bp cumulative by year-end and 84bp by end-2027, up from 79bp ^[1], and the German 10-year has cleared 3.400%, a 15-year high ^[2]. The yen has run in parallel, breaking 153 to a Feb 17 low ^[3] on BOJ hike expectations, with US Treasury Secretary Scott Bessent declaring 'I am the house now' ^[4][5]. What pivots next: the ECB's terminal guidance and the BOJ's September decision on a 1.00%→1.25% move ^[3].

1. ECB Decision and the Terminal Debate

• **[NEW] Thursday pricing:** swap markets price 25bp on Thursday, 49bp cumulative by year-end, and 84bp by end-2027, up from 79bp ^[1]. ING chief economist Marieke Blom says core inflation, services, and wages show limited pressure, and 'one rate hike could be enough' ^[6]. MarketWatch notes the hike is virtually certain but bond markets disagree on the terminal rate, with Middle East energy the swing factor ^[7]. ING adds EUR/USD may keep rising until the market is more certain the Fed needs to hike ^[8].
• **[NEW] German yields:** 10-year at 3.400%, a 15-year high ^[2]; 2-year +3bp on the day to 3.0138%, the highest since June 2024 ^[9].

2. Yen Surge and the Carry Trade

• **[ESCALATED] USD/JPY through 153:** the pair fell to 153.38, earlier touching 152.87 — a Feb 17 low ^[3] — on the prospect of two BOJ hikes by year-end ^[10]. US Treasury Secretary Scott Bessent warned against shorting the yen with 'I am the house now' ^[4][5]. BOK Governor Rhee Chang Yong said FX intervention can calm volatility but noted surprise that the recent action was mainly Japan and the US rather than a broader G7 effort ^[11].
• **[NEW] Capital rotation and pricing:** Norway's sovereign wealth fund is reportedly shifting its fixed-income allocation from US Treasuries to JGBs, fueling speculation of broader inflows to Tokyo ^[12]. BOJ is reported to plan hiking the policy rate from 1.00% to 1.25% this month, the highest in ~31 years, with PM Takaichi Sanae's economic adviser Aida Takushi saying the BOJ will most likely hike in September and continue at a quarterly pace through next January ^[3]. Gavekal's Anatole Kaletsky called the yen 'the most undervalued major currency in modern history' ^[12]. A Reuters explainer asks whether this is the start of the yen carry trade unwind ^[13]; Reuters Morning Bid flags 'yen defies gravity' ^[14]. Japanese retail investors held 3.61 trillion yen in net yen shorts last week, up from August ^[3][4].
• **[ONGOING] Japan pressure:** a People's Daily report flags a gas-and-power double hike weighing on Japan's economy ^[15].
• **Source quality control:** the Norway fund rotation is a single-source report ^[12]; the BOJ hike-to-1.25% plan is sourced to unnamed insiders ^[3].

3. BoE Repricing as Brent Breaks $100

• **[NEW] BoE repricing:** LSEG data show markets now fully price three BoE hikes by July 2027, up from two on Tuesday ^[16]. BNP Paribas has shifted its call to a 25bp November hike from September ^[4]. The UK 30-year gilt auction yielded the highest since 1998 ^[4].
• **[ONGOING] Officials:** Deputy Governor Dave Ramsden said supply-shock frequency could push prices up ^[4]; Governor Andrew Bailey wants to dispel the view of an unconditional hike path ^[4]; MPC member Taylor said keeping rates moderately restrictive can buffer external risks ^[4].
• **Falsifiable test:** the next BoE decision in light of Brent's push through $100/bbl and the ECB's terminal guidance Thursday ^[7][16].

4. Euro Area and EM Macro

• **[NEW] France July industrial output:** -0.4% m/m vs +0.2% expected, with the prior month revised to -0.1% from +0.10% ^[17]. Czech National Bank Deputy Governor said there is no reason to adjust rates this month ^[18]. Fitch: rising JGB yields may keep more domestic capital in Japan; it expects BOJ policy-rate rises in 2026-27 to outpace market expectations, supporting the yen and domestic bonds ^[19]. Thailand central bank minutes: the economy is expected to grow substantially, in line with the prior assessment; government measures target debt-burden reduction ^[20]. India approved 107.8 billion rupees in railway projects ^[21]; the RBI used currency swaps to drain a $115 billion cash surplus ^[22]. RBA Deputy Governor Andrew Hauser said the economy is not at a stage requiring major hikes ^[4]. SK Group Chairman Chey Tae-won accepted a court-ordered 700 billion won divorce settlement and plans to appeal part of the ruling ^[4].
• **Background:** an Xinhua piece examines the Canada-US trade dispute and asks how long it will last ^[23].

5. OPEC+ and Commodities

• **[NEW] Iraq quota push:** Iraq is seeking a substantial increase in its OPEC+ production quota, with a target of 6 million bpd, up from its current baseline; the process is confidential and Iraq's oil ministry did not respond ^[24]. Source: two unnamed people familiar with the matter ^[24].
• **[NEW] Brent above $100:** Brent crude futures moved above $100/bbl in early Wednesday trade ^[16], the swing factor behind the BoE repricing and the ECB terminal debate ^[7][16].