FOMC Meeting and BoJ Rate Decision: Markets on High Alert

The upcoming FOMC meeting has market participants bracing for a potential interest rate hike. However, according to Kevin Warsh, even if the Federal Reserve does decide to raise rates, the tone of the accompanying press conference will be crucial in determining the markets' reaction. A hawkish tone could lead to a stock pullback, while a dovish tone might continue to drive up Treasury yields.

The Bank of Japan's rate decision is also closely watched, with expectations of a 25-basis-point hike. However, BoJ Governor Kazuo Ueda will need to pledge more hikes to prevent USD/JPY from rallying too strongly above the 155.00 level.

Both the US and Japanese 10-year yields have set fresh multi-decade highs, which poses significant risks for countries with massive debt loads. If market participants lose confidence in central banks' ability to fight inflation, bond prices could plummet, leading to higher yields.