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Japanese bond sell-off goes global, impeachment investigation draws in Trump allies, and more weak European data.  Bad auction An auction of Japanese 10-year debt drew the lowest bid-to-cover ratio of any since 2016, leading to a climb in yields across the curve. The sell-off spilled into Treasuries and European sovereign debt, with the U.S. 10-year yield rising by eight basis points. The sudden collapse came after the Bank of Japan's decision to reduce bond purchases in October. It also comes in the wake of a record month for corporate debt issuance globally with companies selling more than $300 billion for the first time ever.   Barr, Giuliani, Pompeo There were rapid developments in the House impeachment inquiry yesterday, with President Donald Trump's personal lawyer, Rudy Giuliani, his Secretary of State Michael Pompeo and Attorney General William Barr all drawn into the widening net. Giuliani was subpoenaed for records of his dealing with Ukraine, while Pompeo and Barr's roles are being examined by U.S. Attorney John Durham, the prosecutor leading the investigation. Trump, meanwhile, is pushing to unmask the whistle-blower behind the allegations. It may be Joe Biden's electoral chances that are being hit harder than Trump's by the investigation.  Sponsored Content by Masterworks Did you know art was the top luxury investment of the ultra-wealthy in 2018? It's no wonder 88% of wealth managers recommend investing in art as it's beaten the S&P by 180% since 2000. Masterworks is the platform for diversifying into high-end art. Start investing like the 1% and request your membership here.   Lower Euro-area inflation came in at 0.9% for September, slower than analyst expectations. Core inflation, excluding food and fuel prices, rose to 1%, higher than the headline rate for the first time since 2016. There was also disappointing news in the region's manufacturing PMI data at 45.7 for the month -- the lowest reading since the depths of the sovereign crisis. There are fears that the drop in manufacturing could turn out to be more of a structural event than a cyclical one.  Markets mixed Overnight, the MSCI Asia Pacific Index rose 0.2% while Japan's Topix Index closed 1% higher. Stock markets in China and Hong Kong were closed for the start of a week-long holiday. In Europe, the Stoxx 600 Index was 0.3% lower at 5:45 a.m. Eastern Time, as equities reversed gains following weak economic data. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 1.737% and gold continued its recent run of losses.  Coming up… July GDP numbers for Canada are published at 8:30 a.m. In the U.S., Markit manufacturing PMI is at 9:45 a.m., with ISM manufacturing at 10:00 a.m. August construction spending is also released at 10:00 a.m. American autosales are published by manufacturers today. Chicago Fed President Charles Evans, Fed Vice Chairman Richard Clarida and Fed Governor Michelle Bowman are all scheduled to speak later.  Only a few more days to tell us what you think if you haven't taken our survey yet. What we've been reading This is what's caught our eye over the last 24 hours. Credit Suisse's chief operating officer resigns over spying scandal. Robots are hurting U.S. workers wages, San Francisco Fed study shows. Hedge fund started from college dorm room accused of fraud by the SEC. Norway unexpectedly withdraws cash from massive wealth fund. Brexit-backing hedge fund boss Odey rejects conflict claims. China brings the big guns to its birthday party. The ECB starts a podcast. And goes straight after cryptocurrencies.  And finally, here's what Joe's interested in this morning In today's paragraph, I want to pick up on the same topic from yesterday. The basic gist was that the Chinese growth model, which suppresses household income while subsidizing the fortunes of business, has resulted in massive excess savings and capital outflows from China. That's having a destabilizing impact on the U.S. because the capital that gets shipped abroad results in higher real estate prices, looser lending conditions, and upward pressure on the dollar, making American products less competitive. That's bad news for American workers and good news for American bankers. It's important to grasp this, because it runs counter to common wisdom that China's main threat is from its endless low-cost labor. If it were just about labor, then we'd expect to see rising household incomes in China result in more demand for U.S. goods, and the world would live happily ever after in Ricardian harmony. All that being said, by looking at the flows of capital (rather than just labor competition) you can see that the pre-Trump status quo was great for elites in both countries, while putting pressure on the working class in both. This is important when considering the news that the Trump administration has considered putting limits on the ability of Chinese companies to list on American stock exchanges, along with other ideas to limit the ability of U.S. investors to own Chinese assets. So far the administration has played down this news, suggesting that nothing is imminent. But you could make the argument that if moves like this to limit capital flows in both directions were ever considered, that it wouldn't be an "escalation" of the trade war, per se, but rather getting to the real heart of the matter. Meanwhile, for more discussion of this, check out CFR's Brad Setser on TV yesterday at the top of What'd You Miss. Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. FOLLOW US SEND TO A FRIEND You received this message because you are subscribed to Bloomberg's Five Things newsletter. Unsubscribe | Bloomberg.com | Contact Us Bloomberg L.P. 731 Lexington, New York, NY, 10022