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Stocks finished the day lower, with the S&P 500 falling about 35 basis points. But the real story has been in rates — not just in the U.S., but globally. Rates in Japan continue to climb, and now we’re seeing U.S. and European rates rise as well. There appears to be a broad global trend toward higher yields, potentially because the world is losing the “low-rate anchor” provided by Japan. As JGB yields move sharply higher, they may be helping to pull rates higher across global markets.

Regardless of the broader debate, one thing does seem clear: if the Fed were truly on the verge of launching a new QE program — as many on social media and in the media keep insisting — someone forgot to tell the three-month Treasury bill. The chart shows that the three-month bill hasn’t moved much at all. It certainly hasn’t reacted in a way that would suggest the Fed is about to unleash a massive round of QE.

Instead, the bill appears to be adjusting to a likely rate cut on Wednesday, which should bring the overnight rate into a range of roughly 3.5% to 3.75%. In fact, the three-month Treasury is still trading above the midpoint of that expected range. It’s hard to reconcile that pricing with the idea that a wave of stimulative QE is imminent — the bill market simply isn’t acting that way.

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The spread between the 10-year Treasury and the 3-month Treasury bill rose by another 3.5 basis points today, reaching 47 basis points. One could argue that this spread is forming a large cup-and-handle pattern, which would suggest that a breakout above roughly 42 basis points could allow it to move substantially higher — potentially toward 2%.

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It also seems like a good time to keep an eye on the Italian 10-year, which rose by almost 7.5 basis points today. If it moves above roughly 3.65%, the technical chart suggests it could be on its way toward 4%.

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It also seems like a good time to watch the spread between Italian and German 10-year yields, which has narrowed to its lowest level in decades. If Italian 10-year rates begin to move higher, that spread could start widening again — a development that would generally signal a risk-off environment for credit spreads globally.

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