Market Summary
Global Bonds Sell Off as Inflation Concerns Rise: Global bonds fell sharply, pushing yields to multi-decade highs as renewed concerns about persistent inflation boosted expectations for a Federal Reserve rate hike this month. The US 10-year yield climbed three basis points to 4.78%, its highest level since January 2025. Japan’s 10-year yield briefly reached 3.00% for the first time since 1996, while Australia’s 10-year yield rose to its highest level since 2011. Markets are increasingly focused on whether central banks will need to maintain restrictive policies for longer as inflationary pressures remain elevated.
Fed Rate-Hike Bets Jump: Markets have significantly increased their expectations for a September Fed rate hike, with swaps now pricing in around a 65% probability, up from 34% before Fed Chair Kevin Warsh’s Jackson Hole remarks. Warsh’s emphasis on containing inflation has reinforced expectations that the Fed may prioritise price stability over near-term growth concerns, keeping pressure on longer-dated government bonds and risk assets.
Yen Holds Near 160: USD/JPY remains around 159.8 after US Treasury Secretary Scott Bessent told Japan’s Finance Minister Satsuki Katayama and BOJ Governor Kazuo Ueda that Japan should raise interest rates. The yen remains under pressure near the 160 level, while expectations of further BOJ tightening continue to build amid elevated inflation and higher Japanese bond yields.
Oil Rises on Middle East Tensions: Brent crude advanced 0.4% this morning to around $90.91 a barrel as renewed fighting in the Middle East heightened concerns about inflation and energy supplies. The rise in oil prices adds another potential source of inflationary pressure for major economies and could complicate the outlook for central bank easing.
Gold Extends Decline: Gold fell 0.3% to around $4,433.50 an ounce, heading for a third consecutive day of losses. Higher global bond yields and increased expectations for a September Fed rate hike have reduced the appeal of the non-yielding metal, despite continued geopolitical uncertainty.
US Equities Edge Higher: US equity futures are modestly positive this morning, with Nasdaq 100 futures up 0.11% and S&P 500 futures gaining 0.03%. However, elevated Treasury yields and shifting expectations for Fed policy could continue to limit risk appetite and increase volatility across equities.
Economic Calendar
- Eurozone Inflation
- US Manufacturing PMI
- Brazil GDP
- Italy CPI
Key Market Moves Today
- S&P 500 Futures: +0.03% (7,701.0)
- US 10-Year Yield: +3.00 bps (4.78%)
- Brent Crude: +0.40% ($90.91)
- Bitcoin: -0.15% ($78,732)
- Spot Gold: -0.30% ($4,433.50)
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