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The policy divergence between the Fed and the BOJ / ECB is showing up with G3 rates. With a series of muted data prints from the US over the past few weeks, investors are paring Fed hike expectations. Within the G10 space the Fed is now priced as the second most dovish (after the RBA). Lower frontend USD rates do restrain longer-end UST yields somewhat. It probably also helps that breakevens are somewhat anchored. By contrast, pricing for further tightening by the BOJ and ECB have firmed up. The odds of a September hike by the BOJ are now hovering close to 80%. If the BOJ delivers in September, that would be an increase in rate hike pace (away from around 50bps per year) and would be a clear signal of reduced tolerance for a persistently weak yen (and consequently elevated inflation worries). Similarly, the market is assigning 90% odds of an ECB hike in September. It is interesting that inflation breakevens are higher now compared to three months ago for Japan and Germany (in contrast to the US). This could be one explanatory factor behind why the ECB and BOJ are keeping to a tightening stance despite the fall off in oil prices. In short, inflation worries and tightening bets are keeping EUR and JPY rates buoyant. As these rates stay buoyant, there is spillover (that comes on top of heavy corporate issuances) unto higher long-end USD rates even if the Fed stays dovish. 
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