Bond yields continue their ascent on inflationary concerns | FXStreet

EU mid-market update: Bond yields continue their ascent on inflationary concerns; Micron strike worries weigh on NQ futures; 10Y JGBs hit 3% for the first time since 1996.

Notes/observations

– Trump’s “that sucker is open” claim is again being tested by something harder to solve than mine-clearing. A Saudi VLCC, Sidr, was reportedly hit/stopped overnight while using the U.S.-facilitated southern Hormuz corridor; UKMTO separately reported a tanker struck by three projectiles, while Iran claimed a vessel had hit mines and CENTCOM denied that any ship had. Kpler counted only five commodity transits Monday versus a 10-day average near 14, with no liquid tankers at all. Reminder: Axios reported that Washington’s target is roughly 50 ships a night by mid-September; if operators still cannot price the southern lane as safe, clearing the channel does not reopen it.

– Warsh’s G20 remarks gave a structural justification for Friday’s hawkishness: the old global savings glut is being replaced by an investment boom in AI, power and infrastructure, so equilibrium long rates should be higher even before further Fed tightening. Bessent sounded similarly relaxed, questioning whether there is really a bond-market “turmoil” and arguing that stronger growth, rather than lower yields, is the way out of the debt problem. Japan then supplied the market test overnight: 10Y JGBs hit 3% for the first time since 1996, while UST 10s held above 4.75% and Bund yields moved higher. Bessent went materially further on Japan at the G20 than his earlier “yen is contained” language. He told CNBC that “I have information that the market doesn’t have” and expects the Japanese government and BoJ to take steps that produce a stronger yen, after already saying Abenomics has run its course.

– Anthropic’s $35B Lambda contract shows how much AI demand now depends on financing architecture. Hut 8 develops the Texas site, Lambda sells the compute, Anthropic commits to consume it, Nvidia supplies the GPUs and, according to the reporting, Nvidia itself holds the lease. That follows the earlier Hut 8 structure where Nvidia’s 15-year commitment was worth $19.6B and could reach roughly $50B with renewals. Anthropic has now committed around $80B of new compute in a week between Lambda and Nscale, but the chip supplier is increasingly helping make the underlying capacity bankable. For Nvidia, the relevant question is no longer just how many GPUs are ordered, but how much of that demand exists without leases, guarantees, equity and residual-capacity support from the ecosystem around it.

– Eurozone manufacturing improved much more clearly in August, with PMI rising to 52.7 and Germany jumping to 54.3 as new orders, exports and investment-related demand strengthened. The recovery is still narrow: France remains uneven and Italy/Spain are softer, while much of the strength sits in intermediate goods, electronics, defence and capital spending rather than household demand. Employment nevertheless stopped falling after more than three years, which makes this a better industrial signal than most of the earlier PMI rebounds. The complication is energy: European gas prices remain elevated (highest since March 2026), storage is unusually low and Rehn is already warning that a prolonged Iran conflict could keep inflation high, so the ECB is losing the comfortable combination of weak growth and falling price pressure.

– Micron’s Taiwan labour dispute is suddenly becoming relevant because it sits directly inside the tightest part of the memory supply chain. The two unions represent nearly 10,000 of Micron’s roughly 15,000 workers in Taoyuan and Taichung, and more than 80% of surveyed members backed possible strike action unless bonuses are replaced with a recurring profit-sharing model closer to Samsung and SK Hynix. Taiwan is Micron’s largest manufacturing base and carries critical DRAM/HBM capacity, so labour is negotiating during an unusually favourable point in the cycle: memory prices are rising, HBM remains scarce and Micron is heading into late-September earnings expecting record results. A strike is not imminent—mandatory mediation comes first—but the broader issue is whether the current memory upcycle begins to lift structural labour costs across the DRAM oligopoly rather than merely producing another temporary bonus windfall.

– Zhipu’s earnings call gave the clearest evidence so far that China is closing part of the compute gap through software rather than waiting for domestic silicon to catch up. Management says GLM-5.3 Flash processed 60T+ tokens in six days on roughly 100,000 domestic accelerators, while infrastructure optimization cut cost per token around 80% YTD and improved end-to-end performance about 3x on the same hardware. GLM-5.3 still uses the same 745B-parameter base model as 5.2, so the improvement came largely from post-training, task environments and inference engineering rather than simply scaling parameters. Commercially, ARR reached $1.6B at end-August and annualizes above $2B on the latest week, but management remains explicit that training compute is the harder constraint and expects the next generation of domestic accelerators to improve that only over the next several months.

– Cross-asset: Asia finished mixed: Nikkei -0.2%, KOSPI +0.2%, CSI 300 ~flat, while Hang Seng ~-0.9% as Shein’s weak debut weighed on Hong Kong. Europe is subdued but not broadly risk-off: STOXX 600 ~flat, DAX -0.2%, CAC +0.4%, with energy +~1.4%. U.S. futures: S&P ~flat, Nasdaq +~0.1%. Rates are the real move: UST 10Y ~4.78%, UST 2Y ~4.35%; 10Y JGB hit 3.00% for the first time since 1996, while USD/JPY ~159.9, EUR/USD ~1.160–1.161. Commodities: Brent +~0.7% around $91.1, WTI +~0.8% around $86.5; gold -0.4% near $4,431. Crypto is firmer despite the yield shock: BTC +~1.3% around $78.7K, ETH +~2.3% around $2.47K.

Asia

– China Aug Ratingdog Manufacturing PMI: 51.5 v 51.0e (10th month of expansion).

– Japan Aug Final Manufacturing PMI: 54.9 v 55.1 prelim (confirmed 7th month of expansion).

– South Korea Aug Manufacturing PMI: 52.3 v 53.1 prior (9th month of expansion).

– Taiwan Aug Manufacturing PMI: 54.7 v 55.1 prior (9th month of expansion).

– Australia Aug Final Manufacturing PMI: 52.0 v 52.0 prelim (confirmed 5th month of expansion).

– Australia Q2 Current Account Balance (A$): -27.2B v -30.0Be.

– Australia July Building Approvals M/M:-3.6% v -5.0%e.

– Japan Q2 Capital Spending (Capex) Y/Y: +1.6% v -0.3%e; Capital Spending (ex-software) Y/Y: 3.6% v 1.6%e.

– South Korea Aug Trade Balance: $34.8B v $30.5Be; Exports Y/Y: 68.7% v 63.0%e; Imports Y/Y: 22.5% v 25.0%e.

– Japan’s Top FX Diplomat Mimura and Fin Min Katayama said to have held good discussions with US Treasury Sec Bessen at G20 on need for further cooperation on FX.

– Treasury Sec Bessent said to have told Japan officials that rate hikes were needed.

Global conflict/tensions

– Pres Trump confirmed that new Iran strikes would be limited; Claimed an average of thirty ships a night escorted out of the Strait of Hormuz; Ruled out ever using a nuclear weapon against Iran.

– Army Sec Dan Driscoll said to have resigned after months of friction with Def Secretary Hegseth.

Europe

– UK Aug BRC Shop Price Index Y/Y: 1.5% v 0.9%e (highest since Feb 2024).

– UK PM Burnham said to signal fresh measures to help voters with the cost of living on Tues (Sept 1st).

– ECB’s Rehn (Finland): “Conflict of attrition” in Iran could keep inflation high. ECB “must show no complacency” on inflation pressure.

Americas

– Pres Trump: Rates are too high; have a lot of respect for Warsh he will to what he has to do.

– VP Vance: We want to have a positive relationship with China; We also recognize China is a competiton. Ensuring the freedom of trade movement across the Strait of Hormuz.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -1.16% at 10,699.05, DAX -1.22% at 25,960.39, CAC-40 -0.41% at 8,300.69, IBEX-35 -1.08% at 19,772.68, FTSE MIB -1.05% at 52,058.00, SMI -0.39% at 14,230.50, S&P 500 Futures -0.57%].

Market focal points/key themes: European equities held broadly flat on Tuesday as an intensifying global bond market rout, triggered by Japanese 10-year yields surging to their highest level in a generation, lifted U.S. Treasury and European sovereign yields and forced a re-pricing of interest-rate curves amid persistent inflation fears and heavy debt issuance.The pan-European STOXX 600 was unchanged while Germany’s DAX fell 0.6%, France’s CAC 40 rose 0.1% and London’s FTSE 100 slipped 0.4%, with gains in energy producers eclipsed by selling across industrials, automobiles, technology, real estate and high-dividend utilities as higher discount rates reduced the appeal of equity valuations. Novartis surged 5.5% after remibrutinib hit its Phase III primary endpoint in relapsing multiple sclerosis, while Reckitt climbed the same amount on a favorable U.S. jury verdict in infant-formula litigation plus a JPMorgan upgrade; Air Liquide gained 3.5% on Elliott’s activist stake and margin-pressure campaign, and energy names such as Equinor, Vår Energi, ORLEN and Neste advanced 2–3.5% on the Brent spike above $91–92. On the downside, Partners Group tumbled 7% after H1 profit fell 13%, evergreen redemptions persisted and the CEO departure was announced, while InterContinental Hotels Group dropped 3.5% in sympathy with weaker U.S. lodging peers, and defence names including Rheinmetall (–3%), Leonardo (–2%) and Saab (–1%) gave back recent gains as higher yields triggered profit-taking. Markets now focus on U.S. July JOLTS report that will offer early signals on labour-market tightness ahead of Friday’s nonfarm payrolls and the Federal Reserve’s September decision.

Equities

– Consumer discretionary: InterContinental Hotels Group [IHG.UK] –3.5% (likely U.S. lodging catch-up/peer read-through: Marriott –2.7%, Hyatt –3.1% and Hilton –1.7% on the comparable tape as higher yields/oil weigh on travel multiples; no fresh IHG company announcement identified), Bunzl [BNZL.UK] +3.0% (H1 adjusted operating profit +8.9%; FY26 outlook upgraded and a new £500m buyback announced — the forward/capital-return surprise is driving the reaction).

– Financials: Partners Group [PGHN.CH] –7.0% (H1 attributable profit –13%; mature evergreen funds continue to see redemptions, FY performance income guided to only ~20–25% of revenue vs 25–40% long-run range, plus David Layton is stepping down as CEO; stronger-than-expected new client demand was not enough to offset those negatives).

– Healthcare: Novartis [NOVN.CH] +5.5% (remibrutinib met the primary endpoint in Phase III relapsing-MS studies; shares are rallying despite the separate suspension of autoimmune cell-therapy trials following three patient deaths).

– Industrials: Rheinmetall [RHM.DE] –3.0% (broad European defence de-rating/profit-taking rather than fresh Rheinmetall-specific news; current German indications around –3%, following the recent sector run and sharp rise in sovereign yields), Air Liquide [AI.FR] +3.5% (Elliott has built a stake and is pushing for higher margins/capital returns ahead of the October CMD; current Euronext print ~+3.6%).

Speakers

– ECB’s Kocher (Austria) noted that ECB rate hike would be needed if upside risks were confirmed in upcoming Staff Projections. Stressed that upside risks had increased in region recently and must ensure that inflation did not remain above target in the medium term.

– Finland PM Orpo noted that the domestic economy was experiencing broad-based growth. Public finances to remain dire for a long time and to cut spending by nearly €1.0B in 2027.

– Japan Chief Cab Sec Kihara reiterated stance that was closely watching market moves. Would not comment on daily price movements but added interest rates were set by markets.

– China said to issue guidelines on overseas competition & compliance for auto industry. Automakers should not disrupt market order and warned against false advertising abroad to protect Chinese brand image.

– Reports of two supertankers being struck nearly simultaneously while using the U.S.-facilitated southern Hormuz corridor off Oman according to maritime risk consultancy Marisks.

Currencies

– Sept trading commenced with rate hikes, seasonal concerns and rising bond yields to start the month. Dealers noted that the month of September was historically the start of a prolong trend periods in Dollar related pairs. Some of the most historic events in currencies have occurred in the month of September. Examples include The Plaza Accord in 1985, The BOE decision to step out of EMU in 1992, the Terrorist attack on the World Trade Center in 2001.

– USD was a touch firmer during the session with EUR/USD just below the 1.16 level and USD/JPY retesting the 160 area.

– Japan’s Top FX Diplomat Mimura and Fin Min Katayama stated after G20 meeting that held good discussions with US Treasury Sec Bessent for further cooperation on FX.

– Higher oil and gas prices continued to stoke concerns about inflation pushing bond yields to highest levels since the great financial crisis. The multi-year highs following market expectations of numerous rate hikes by central banks in Sept. The 10-year German Bund yield last at 3.35%, France 10-year Oat at 4.21% and 10-year Gilt yield at 5.23% (Fri close); 10-year Treasury yield: 4.78%; 10-year JGB: 2.99%.

Economic data

– (NL) Netherlands Aug Preliminary CPI Y/Y: 3.3% v 3.3%e; CPI EU Harmonized M/M: 0.1% v 0.6%e; Y/Y: 2.8% v 3.3%e.

– (NL) Netherlands Aug Manufacturing PMI: 53.8 v 54.4 prior (14th month of expansion).

– (DE) Germany July Retail Sales M/M: -3.4% v +0.5%e; Y/Y: -2.5% v +0.7%e.

– (UK) Aug Nationwide House Price Index M/M: 0.2% v 0.1%e; Y/Y: 1.6% v 2.1%e.

– (RU) Russia Aug Manufacturing PMI: 48.8 v 50.7 prior (1st contraction in 3 months).

– (CH) Swiss July Real Retail Sales Y/Y: 2.3% v 1.9% prior.

– (SE) Sweden Aug Manufacturing PMI: 56.1 v 55.7 prior (25th month of expansion).

– (HU) Hungary Q2 Final GDP Q/Q: 0.5% v 0.4% prelim; Y/Y: 1.7% v 1.7% prelim.

– (AT) Austria Aug Preliminary CPI M/M: 0.6% v 0.0% prior; Y/Y: 3.2% v 2.8% prior.

– (TR) Turkey Aug Manufacturing PMI: 48.1 v 47.7 prior (29th month of contraction).

– (PL) Poland Aug Manufacturing PMI: 48.3 v 49.8e (17th month of contraction).

– (HU) Hungary Aug Manufacturing PMI: 51.3 v 51.4 prior (7th month of expansion).

– (ES) Spain Aug Manufacturing PMI: 49.5 v 50.5e (moved back into contraction)).

– (CH) Swiss Aug Manufacturing PMI: 57.1 v 54.0e (6th month of expansion); Services PMI: 58.3 v 63.9 prior.

– (CZ) Czech Aug Manufacturing PMI: 54.1 v 52.6e (6th month of expansion).

– (TH) Thailand Aug Business Sentiment Index: 49.8 v 46.7 prior.

– (IT) Italy Aug Manufacturing PMI: 49.6 v 51.5e (1st contraction in 7 months).

– (FR) France Aug Final Manufacturing PMI: 51.1 v 51.5 prelim (confirmed move back into expansion).

– (DE) Germany Aug Final Manufacturing PMI: 54.3 v 54.1 prelim (confirmed 7th month of expansion).

– (EU) Euro Zone Aug Final Manufacturing PMI: 52.7 v 52.8 prelim (confirmed 7th month of expansion).

– (GR) Greece Aug Manufacturing PMI: 54.4 v 54.3 prior (42nd month of expansion).

– (IT) Italy Q2 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: 1.0% v 1.0% prelim.

– (UK) July Net Consumer Credit: £2.0B v £1.7Be; Net Lending: £4,3B v £5.7Be.

– (UK) July Mortgage Approvals: 56.1K v 59.4Ke.

– (UK) July M4 Money Supply M/M: -0.3% v +0.9% prior; Y/Y: 4.5% v 5.0% prior; M4 (ex-IOFCs) 3-month Annualized: 2.2% v 4.9% prior.

– (UK) Aug Final Manufacturing PMI: 51.7 v 51.5 prelim (confirmed 10th month of expansion).

– (IT) Italy July Unemployment Rate: 5.8% v 5.6%e.

– (NG) Nigeria Aug PMI: 54.3 v 52.5 prior.

– (EU) Euro Zone Aug Preliminary Advance CPI Estimate Y/Y: 3.3% v 3.3%e; CPI Core Y/Y: 2.4% v 2.5%e.

– (EU) Euro Zone July Unemployment Rate: 6.4% v 6.3%e.

– (BE) Belgium July Unemployment Rate: % v 6.3% prior.

– (IT) Italy Aug Preliminary CPI M/M: 0.5% v 0.4%e; Y/Y: 3.3% v 3.3%e.

– (IT) Italy Aug Preliminary CPI EU Harmonized M/M: 0.1% v 0.3%e; Y/Y: 3.2% v 3.4%e.

– (CY) Cyprus Q2 Final GDP Q/Q: 0.8% v 0.8% prelim; Y/Y: 3.3% v 3.3% prelim.

– (ZA) South Africa Aug Manufacturing PMI: 45.8 v 47.0e (3rd month of contraction).

Fixed income issuance

– (ES) Spain Debt Agency (Tesoro) sold total €6.49B vs. €5.5-6.5B indicated range in 6-month and 12-month bills.

– (SE) Sweden sold SEK12.5B vs. SEK12.5B indicated in 12-month Bills.

Looking ahead

– (RO) Romania Aug International Reserves: No est v $75.0B prior.

– (AR) Argentina Aug Government Tax Revenue: No est v 23.0T prior.

– (ZA) South Africa Aug Naamsa Vehicle Sales Y/Y: No est v 11.9% prior.

– (ID) Indonesia to sell bills and bonds.

– 05:25 (EU) Daily ECB Liquidity Stats.

– 05:15 (CH) Switzerland to sell 3-month Bills.

– 05:30 (DE) Germany to sell €5.5B in 2.90% Oct 2031 BOBL.

– 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €3.0B in 3-month, 6-month and 12-month bills.

– 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

– 05:30 (ZA) South Africa to sell combined ZAR2.55B in 2033, 2039 and 2042 bonds.

– 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

– 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR).

– 06:00 (PT) Portugal July Industrial Production M/M: No est v -3.8% prior; Y/Y: No est v -0.7% prior.

– 06:30 (EU) ESM to sell €1.6B in 3-month Bills.

– 08:00 (CZ) Czech Aug Budget Balance (CZK): No est v -176.6B prior.

– 08:00 (BR) Brazil Q2 GDP Q/Q: 0.4%e v 1.1% prior; Y/Y: 1.8%e v 1.8% prior; GDP 4Qtrs Accumulated: 1.8%e v 2.0% prior.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 08:30 (CL) Chile July Economic Activity Index (Monthly GDP) M/M: No est v 0.6% prior; Y/Y: -0.1%e v 2.4% prior.

– 08:30 (DE) ECB’s Nagel (Germany).

– 08:55 (US) Weekly Redbook LFL Sales data.

– 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to cut Base Rate by 25bps to 3.25%.

– 09:00 (BR) Brazil Aug Manufacturing PMI: No est v 47.5 prior.

– 09:05 (US) Fed’s Barr.

– 09:30 (CA) Canada Aug Manufacturing PMI: No est v 53.5 prior.

– 09:45 (US) Aug Final S&P Manufacturing PMI: 53.3e v 53.2 prelim.

– 10:00 (US) Aug ISM Manufacturing: 55.2e v 55.6 prior.

– 10:00 (US) July JOLTS Job Openings: 7.313Me v 7.359M prior.

– 10:00 (US) July Construction Spending M/M: 0.0%e v -0.1% prior.

– 10:30 (US) Aug Dallas Fed Services Activity: 8.0e v 6.6 prior.

– 10:30 (US) Atlanta Fed GDP Now: Raises/cuts Q3 GDP estimate from 4.6% to %.

– 11:00 (MX) Mexico Aug Manufacturing PMI: No est v 51.3 prior.

– 11:00 (MX) Mexico July Total Remittances: $5.5Be v $5.5B prior.

– 11:00 (MX) Mexico Central Bank Economist Survey.

– 11:00 (CO) Colombia Aug Manufacturing PMI: No est v 52.7 prior.

– 11:00 (PE) Peru Aug CPI M/M: 0.1%e v 0.3% prior; Y/Y: 4.4%e v 4.1% prior.

– 11:30 (EU) ECB’s Vujcic (Croatia) in Berlin.

– 11:30 US) Treasury to sell 6-Week Bills.

– 11:30 US) Treasury to sell 52-Week Bills.

– 12:00 (IT) Italy Aug New Car Registrations Y/Y: No est v 3.9% prior.

– 14:00 (MX) Mexico Aug IMEF Manufacturing Index: 49.7e v 49.4 prior; Non-Manufacturing Index: 49.6e v 49.9 prior.

– 16:30 (US) Weekly API Crude Oil Inventories:

– 18:45 (NZ) New Zealand July Building Permits M/M: No est v -3.6% prior.

– 19:00 (KR) South Korea Aug CPI M/M: 0.4%e v -0.2% prior; Y/Y: 3.2%e v 2.8% prior; CPI (ex-food/energy) Y/Y: 3.4%e v 2.6% prior.

– 21:30 (AU) Australia Q2 GDP Q/Q: 0.3%e v 0.3% prior; Y/Y: 1.9%e v 2.5% prior.

– 22:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to raise Official Cash Rate (OCR) by 25bps to 2.75%.

– 22:00 (NZ) RBNZ Monetary Policy Statement.

– 22:35 (CN) China to sell 3-month and 6-month bills.

– 22:35 (CN) China to sell 30-Year Additional Bonds.

– 23:00 (NZ) RBNZ Gov Breman post rate decision press conference.

– (JP) BOJ Board Member Takata in Sapporo.

– (US) Massachusetts Primary Election.