The BOJ left monetary policy unchanged in Kuroda's final meeting as central bank governor and that saw the yen fell in the aftermath. Meanwhile, Treasury yields continue to plunge as Fed odds reset with traders getting worried and anxious about the situation involving SVB since yesterday.
That is creating two differing narratives in the market and it has resulted in a divergence in the usual correlation between USD/JPY and 10-year Treasury yields, as seen above.
For now, it is going to be tough for markets to seek out clarity as to which side has got it right. The FX market is rather sanguine about the risks involving SVB at the moment but it could also be the case that bond traders are overblowing those fears.
Eventually, something's gotta give and we will see either one of USD/JPY or 10-year Treasuries play catch up to the other. That will make for a decent corrective move to capitalise on when it happens.
