| Good morning. Bank of England is set to raise rates, the ineffectiveness of Treasuries and Bank of Japan enters the market again. Here's what people are talking about. The Bank of England is likely to boost interest rates again on Thursday, but a slowing in the pace of inflation may give policymakers scope to scale back the size of hikes. Economists and investors anticipate the benchmark lending rate will rise at least a quarter-point to 5.25%, with a strong chance of a bigger half-point increase that would match the scale of action taken in June. Markets are now bracing for rates to peak around 5.75% by the end of this year. Treasuries haven't been this ineffective as a stock hedge since the 1990s. The one-month correlation between the Bloomberg US Treasury Total Return Index and the S&P 500 strengthened this week to 0.82, its highest reading since 1996, when low inflation coupled with strong domestic growth led to both asset classes gaining. The current weakness of bonds as a risk hedge came as investors were hit with a triple whammy; a government plan to boost bond sales, Fitch Ratings' downgrade of the US' top sovereign credit rating and a stronger-than-expected private job report. The Bank of Japan announced an unscheduled bond-purchase operation for the second time this week, underscoring its determination to curb sharp moves in rates despite a recent policy adjustment to allow benchmark yields to climb as high as 1%. The central bank entered the market after 10-year government yields touched 0.65%, marking a fresh nine-year high. The repeated intervention is another reminder that Japan's slow retreat from ultra-loose monetary policy brings an elevated risk of volatility across multiple asset classes globally. Bill Ackman is making sizable bets on declines for 30-year US Treasuries as a hedge on the impact of higher long-term rates on stocks. Ackman also sees the short as a "high probability" standalone play, the Pershing Square Capital Management founder said in a post on X, the platform formerly known as Twitter. An increasing supply of Treasuries will be needed to fund the current budget deficit, future spending plans and higher refinancing rates, Ackman said. He is making the investment via options, rather than shorting bonds outright. European equity futures are flat ahead of the BOE's rate decision, with a press conference by Governor Bailey to follow. Expected data include Switzerland CPI inflation and Germany's trade balance. A slew of earnings reports are expected for companies including Adidas, BMW and Lufthansa. This is what's caught our eye over the past 24 hours. Calling All StartupsKey to the soft-landing debate that's keeping stocks in relatively upbeat mood -- Wednesday's downgrade jitters notwithstanding -- is the idea that wage inflation will come down even as the jobs market remains relatively strong. The only way that can happen is if the US participation rate keeps rising. And there's good reason to think it will. At 62.6%, the number remains 30 basis points below the pre-pandemic level. Given a labor force of about 167 million workers, that represents about 500,000 entrants to the job market above population growth, thus boosting US GDP while helping with wage disinflation. So, while there'll be a lot of focus on the absolute change in nonfarm payrolls on Friday, and a lot of talk about wages, this is the number stocks investors should be watching to see if they'll get their inflation-free growth. Eddie van der Walt is Deputy Managing Editor of the Markets Live blog on the Bloomberg Terminal, based in London. Follow him on Twitter at @EdVanDerWalt. | 
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