Understand why my ssh configuration does not allow passwordless login?

I thought that the PasswordAuthentication directive was responsible for letting you log in using only the ssh key pair (local private key / remote public key). I am able to log in using my password with the configuration shown below but the minute I change PasswordAuthentication yes to PasswordAuthentication no I get a error.

muname@linode< ip address here >: Permission denied (publickey).

Versions Information

muname@linode:~$ ssh -V
OpenSSH_7.6p1 Ubuntu-4ubuntu0.3, OpenSSL 1.0.2n  7 Dec 2017  
Server built: 2019-07-16T18:14:45  
muname@linode:~$ lsb_release -a  
…  
Distributor ID: Ubuntu  
Description: Ubuntu 18.04.3 LTS  
Release: 18.04  
Codename: bionic  

Current config with own comments too..

#       $OpenBSD: sshd_config,v 1.101 2017/03/14 07:19:07 djm Exp $

# This is the sshd server system-wide configuration file.  See
# sshd_config(5) for more information.

# This sshd was compiled with PATH=/usr/bin:/bin:/usr/sbin:/sbin

# The strategy used for options in the default sshd_config shipped with
# OpenSSH is to specify options with their default value where
# possible, but leave them commented.  Uncommented options override the
# default value.

#Port 22

 AddressFamily inet
#ListenAddress 0.0.0.0  # <--  Is that default to have two ??
#ListenAddress ::  # <--  Is that default to have two ??

#HostKey /etc/ssh/ssh_host_rsa_key
#HostKey /etc/ssh/ssh_host_ecdsa_key
#HostKey /etc/ssh/ssh_host_ed25519_key

# Ciphers and keying
#RekeyLimit default none

# Logging
#SyslogFacility AUTH
#LogLevel INFO

# Authentication:

 LoginGraceTime 1m
 PermitRootLogin no

#StrictModes yes
#MaxAuthTries 6
#MaxSessions 10

#PubkeyAuthentication yes  # <--  Thought that was default "yes"

# Expect .ssh/authorized_keys2 to be disregarded by default in future.
#AuthorizedKeysFile     .ssh/authorized_keys .ssh/authorized_keys2

#AuthorizedPrincipalsFile none

#AuthorizedKeysCommand none
#AuthorizedKeysCommandUser nobody

# For this to work you will also need host keys in /etc/ssh/ssh_known_hosts
#HostbasedAuthentication no
# Change to yes if you don't trust ~/.ssh/known_hosts for
# HostbasedAuthentication
#IgnoreUserKnownHosts no
# Don't read the user's ~/.rhosts and ~/.shosts files
#IgnoreRhosts yes

# To disable tunneled clear text passwords, change to no here!

#PasswordAuthentication yes  # <--  THERE IT IS! When change to no login fails

#PermitEmptyPasswords no

# Change to yes to enable challenge-response passwords (beware issues with
# some PAM modules and threads)
ChallengeResponseAuthentication no

# Kerberos options
#KerberosAuthentication no
#KerberosOrLocalPasswd yes
#KerberosTicketCleanup yes
#KerberosGetAFSToken no

# GSSAPI options
#GSSAPIAuthentication no
#GSSAPICleanupCredentials yes
#GSSAPIStrictAcceptorCheck yes
#GSSAPIKeyExchange no

# Set this to 'yes' to enable PAM authentication, account processing,
# and session processing. If this is enabled, PAM authentication will
# be allowed through the ChallengeResponseAuthentication and

# PasswordAuthentication.  Depending on your PAM configuration,
# PAM authentication via ChallengeResponseAuthentication may bypass
# the setting of "PermitRootLogin without-password".
# If you just want the PAM account and session checks to run without
# PAM authentication, then enable this but set PasswordAuthentication
# and ChallengeResponseAuthentication to 'no'.
UsePAM yes

#AllowAgentForwarding yes
#AllowTcpForwarding yes
#GatewayPorts no
X11Forwarding yes
#X11DisplayOffset 10
#X11UseLocalhost yes
#PermitTTY yes
PrintMotd no
#PrintLastLog yes
#TCPKeepAlive yes
#UseLogin no
#PermitUserEnvironment no
#Compression delayed
#ClientAliveInterval 0
#ClientAliveCountMax 3
#UseDNS no
#PidFile /var/run/sshd.pid
#MaxStartups 10:30:100
#PermitTunnel no
#ChrootDirectory none
#VersionAddendum none

# no default banner path
#Banner none

# Allow client to pass locale environment variables
AcceptEnv LANG LC_*

# override default of no subsystems
Subsystem       sftp    /usr/lib/openssh/sftp-server

# Example of overriding settings on a per-user basis
#Match User anoncvs
#       X11Forwarding no
#       AllowTcpForwarding no
#       PermitTTY no
#       ForceCommand cvs server

Can anyone spot this what is the problem?
Thanks in advance for help.

Jake