Is the rates market ahead of Frankfurt?

S&P 500 +0.46% to 7,666.60

US 10-year yield -1.3 basis points to 4.784%

Spot gold +1.36% to $4,387.86 an ounce

DXY -0.10% to 99.56

Key data to move markets today

EU: German, French, Italian, Spanish and Eurozone’s HCOB Composite and Services PMIs and Eurozone’s PPI

UK: S&P Global Composite and Services PMIs

USA: Nonfarm Productivity, Initial and Continuing Jobless Claims, S&P Global Composite and Services PMIs, ISM Services PMI, Prices Paid, Employment and New Orders Indices and a speech by Fed Governor Chistopher Waller and Cleveland Fed President Beth Hammack

Global Macro Updates

Are real yields hiking already? A September ECB hike is now fully priced, and the more interesting question is whether 2.5% marks the summit or merely base camp. Bank of Ireland’s Governor Gabriel Makhlouf’s answer leans toward the latter: inflation above 3%, growth running slightly ahead of the June staff path and a deposit rate that he considers non-restrictive leave the door open to 2.75% or beyond, as reported by the Financial Times. Still, with core inflation easing and no clear second-round wage effects, the Governing Council has little incentive to pre-commit after 10 September.

The curve is less relaxed. Two-year Bund yields are hovering around 3%, while the 10-year has climbed toward 3.4%, its highest level since 2011. More tellingly, Germany’s 2046 inflation-linked Bund, Europe’s equivalent to a long-dated TIPS, was offering a real yield of around 1.45% in late August. That does not invalidate Makhlouf’s argument that 2.5% is not restrictive at the policy-rate level, but it suggests financial conditions are already doing some of Frankfurt’s work. Investors are demanding compensation not only for expected inflation, but also for committing capital in real terms.

Britain presents the same paradox, only louder. Markets have moved from debating cuts to pricing as many as three 25-bps increases over the next two years, with one potentially arriving in November. Two-year gilt yields have pushed above 4.5%, while the 10-year has traded around 5.2%. BoE Governor Andrew Bailey can therefore argue that the rates market has tightened on Threadneedle Street’s behalf. BoE MPC member Catherine Mann can simultaneously argue that it may not be enough, as activity has improved, the labour market appears to be stabilising and today’s inflation could become tomorrow’s wage settlement.

Here, too, linkers sharpen the signal. Long-dated index-linked gilts, the UK’s TIPS analogue, currently offer real yields of roughly 2.1% to 2.6%, while implied RPI inflation across much of the curve remains around 3.3% to 3.5%. The market is therefore pricing both persistent inflation and genuinely restrictive real financing costs. That is less a clean hawkish vote than an uncomfortable hedge against policy, fiscal and supply risk.

The October fiscal statement could still move the dial either way. Credible consolidation would reduce the burden on the BoE; spending ambitions without matching revenue would add another layer of term premium. The takeaway from inflation-linked bonds for both central banks is clear: policy rates might not seem restrictive on the surface, but the bond market is already applying pressure and demanding a higher premium for inflation protection.

US Stock Indices

Dow Jones Industrial Average +0.56%
Nasdaq 100 +0.23%
S&P 500 +0.46%, with 10 of the 11 sectors of the S&P 500 up

US equities closed higher on Wednesday, led by gains in the Materials and Communication Services sectors, both of which advanced more than one percent. Within the S&P 500, Real Estate was the only sector to finish lower, declining -0.79%. The S&P 500 rose +0.46%, the Dow Jones Industrial Average gained +0.56%, or 295.07 points, and the Nasdaq Composite advanced +0.45% to 26,217.83.

In corporate news, Elliott Investment Management has built a sizeable stake in Deutsche Telekom and has urged the German telecommunications group to abandon a potential merger with its US subsidiary, T-Mobile US, according to people familiar with the matter cited by Bloomberg news. Elliott is also pressing Deutsche Telekom to evaluate alternative measures to unlock shareholder value, including larger share buybacks.

A federal judge ruled that Google must change certain ad-tech practices, while stopping short of ordering a forced breakup of the company.

Barrick Mining is considering delaying the planned public listing of its North American gold business until next year, according to a person familiar with the matter cited by Bloomberg news. The company is working with Goldman Sachs Group on the transaction and is in talks with additional banks regarding roles on the potential IPO. On Barrick’s 10 August earnings call, Chief Executive Officer Mark Hill said he would lead the North American unit following the IPO, while Sebastiaan Bock would become CEO of the company’s remaining operations.

European Stock Indices

CAC 40 -0.26%
DAX -0.50%
FTSE 100 -0.30%

Commodities

Gold spot +1.36% to $4,387.86 an ounce
Silver spot +0.59% to $64.97 an ounce
West Texas Intermediate -0.06% to $90.63 a barrel
Brent crude +0.05% to $95.24 a barrel

Gold rebounded from a near one-month low on Wednesday, supported by a pullback in the US dollar and Treasury yields from recent highs.

Spot gold rose +1.36% to $4,387.86 per ounce, recovering from its lowest level since 7 August earlier in the session.

The US dollar also eased from a near three-week peak.

Spot silver gained +0.59% to $64.97 per ounce.

Oil prices ended Wednesday broadly unchanged as investors assessed the risk that renewed military strikes between the US and Iran could disrupt Middle East supply flows.

Brent crude futures rose by 5 cents, or +0.05%, to $95.24 per barrel, while US West Texas Intermediate crude futures fell by 5 cents, or -0.06%, to $90.63 per barrel.

The latest attacks marked the most significant exchange of fire between the US and Iran since July, with the conflict now in its seventh month.

US forces struck more than 100 Iranian targets on Tuesday in retaliation for Iranian attacks on commercial vessels in the Strait of Hormuz. Iran responded overnight with missile and drone launches targeting neighboring countries, including Kuwait and the UAE. 

The US President said later in the day that the US was prepared to carry out another strike against Iran, while indicating that the renewed campaign would not continue for an extended period.

Brent and WTI fluctuated during the previous trading session, and session highs for both benchmarks were the strongest since 24 July.

OPEC-7 is not expected to make any production-policy changes. The group is likely to keep its October oil-output policy unchanged at Sunday’s meeting, according to three sources close to the matter cited by Reuters.

New York diesel prices were quoted at $201 per barrel on Wednesday and higher elsewhere, while the WTI-diesel crack spread reached $106 per barrel.

The DOE’s Weekly Petroleum Status Report, released on Wednesday, showed a crude stockpile draw of 4.45 million barrels versus expectations for a 1.1 million-barrel decline, marking the first crude draw in five weeks. 

Gasoline inventories fell by 1.17 million barrels, while distillate stocks rose by 800,000 barrels. Although total distillate inventories increased, PADD 1 stocks fell to record lows. Refinery utilisation rose to 98.0%, the highest level since August 2018, while jet fuel production remained above 2.0 million bpd for an 18th consecutive week.

China is expected to allow refined-product exports to remain steady this month versus August, enabling refiners to benefit from stronger overseas margins as Beijing continues to ease export controls, according to five trade sources briefed on the matter and cited by Reuters.

Shipping traffic through the Strait of Hormuz and Bab el-Mandeb remained subdued. Kpler recorded four commodity vessels crossing the Strait of Hormuz on Tuesday, compared with 10 on Monday, while 18 commodity ships passed through Bab el-Mandeb versus a 10-day average of 24.

Weekly EIA storage data for the week ended 28 August are due tomorrow, with consensus at +30 Bcf versus the five-year average of +37 Bcf.

TTF rose +1.8% to €73.50 per MWh, reaching a 44-month high.

Note: As of 4 pm EDT 2 September 2026

Currencies

EUR -0.03% to $1.1586
GBP -0.24% to $1.3479
Bitcoin +0.15% to $77,303.68
Ethereum -1.02% to $2,390.10

The Japanese yen strengthened sharply against the US dollar on Wednesday, after previously retracing roughly half of the gains recorded following the rare joint Washington-Tokyo intervention at the end of July.

The catalyst for the move was not immediately clear. Before the intervention, the yen had weakened to a 40-year low of ¥163.98 per US dollar, then rallied to ¥155.21 before giving back part of the advance. It was +0.92% stronger on the day at ¥158.68 per US dollar.

Hawkish BoJ board member Hajime Takata said on Wednesday that the central bank should raise interest rates nimbly to counter intensifying inflationary pressures, rather than adhere to the semiannual pace markets have broadly anticipated.

The driver of the dollar-yen move remains difficult to identify, although it appeared more consistent with a rate check than a direct intervention aimed at shifting the broader trend, particularly as the recent intervention failed to do so.

In a rate check, a government or central bank asks financial institutions to quote an exchange rate without conducting outright buying or selling.

BoJ Governor Kazuo Ueda also signalled on Tuesday that a rate hike this month remained a strong possibility. US Treasury Secretary Scott Bessent expressed support for decisive monetary-policy steps to address yen weakness during a meeting with Ueda, the Treasury Department said on Tuesday.

The yen has struggled to sustain support amid the wide interest-rate differential between the US and Japan, with the currency weakening back to 160.39 earlier on Wednesday, its softest level since the intervention.

The dollar index fell -0.10% to 99.56, while the euro slipped -0.03% to $1.1586.

Sterling weakened -0.24% to $1.3479.

Fixed Income

US 10-year Treasury -1.3 basis points to 4.784%
German 10-year Bund +3.0 basis points to 3.339%
UK 10-year Gilt +1.1 basis points to 5.161%

US Treasury yields eased from multi-year highs on Wednesday, with the 10-year yield ending a five-session streak of increases.

The latest labour-market data followed Tuesday’s Job Openings and Labor Turnover Survey, which pointed to a slow but stable employment backdrop. Friday’s payrolls report will be closely watched for its implications for the Fed’s policy path.

The US 10-year Treasury yield fell -1.3 bps to 4.784%, snapping its longest daily rising streak since March. Earlier in the session, the yield reached 4.818%, its highest level since 1 November 2023.

The 30-year Treasury yield declined -1.7 bps to 5.260%, after touching a two-week high of 5.296% earlier in the session.

New York Fed President John Williams said rising long-term bond yields were not being driven by inflation concerns, but rather reflected the strength of the economy. He also noted that he was still gathering information ahead of his next monetary-policy decision.

Several Fed officials have indicated in the last week that another rate hike could be appropriate if inflationary pressures persist.

The US 2s10s yield curve stood at 39.6 bps, 0.9 bps wider than Tuesday.

Markets priced a 62.3% probability of at least a 25 bps Fed rate hike at the September meeting, according to CME FedWatch tool, up from 36.6% a week earlier.

The 2-year US Treasury yield, which typically tracks expectations for the Fed funds rate, declined -2.2 bps to 4.388%, after rising earlier to 4.410%, its highest level since January 2025.

In its latest Beige Book, the Fed said US economic activity increased modestly, employment rose slightly and prices increased moderately in recent weeks.

Eurozone bond yields rose for a sixth consecutive session on Wednesday.

Germany’s 10-year government bond yield climbed to 3.339%, its highest level since 2011, before paring part of the increase.

Wednesday’s government-bond selloff extended a broader global rout that has pushed borrowing costs to multi-decade highs.

Data released on Tuesday showed eurozone inflation accelerated to 3.3% in August from 2.9% in July, driven almost entirely by higher energy costs, as crude oil and natural gas prices rose and refiners increased margins.

Germany’s 2-year government bond yield, which is more sensitive to ECB deposit-rate expectations, rose above 3% for the first time since 2024 and traded +4.4 bps higher on the day at 3.007%. At the long end of the curve, Germany’s 30-year yield rose +1.4 bps to 3.837%.

Money markets priced a near-100% probability that the ECB will raise interest rates at its meeting later this month, with a strong likelihood of an additional hike by year-end.

Italy’s 10-year BTP yield advanced +4.0 bps to 4.214%, while France’s 10-year OAT yield rose +4.7 bps to 4.253%.

Note: As of 4 pm EDT 2 September 2026

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