Futures Slide As Treasury Yields Surge, Erasing Bessent Intervention, Driven By Oil Spike
US futures slide and are trading at session lows, as bond yields surge after yesterday’s Treasury announcement, having now erased the entire post buyback-boost move; yields are 4-5bps higher as the curve bear steepens sharply with the 10Y yield now at 4.69%, above where it was before the Treasury's press release yesterday, driven by a surge in Brent above $94 after Trump vowed to unleash an "Economic D-Day" on Iran's economy. As of 8:00am ET, S&P futures are down 0.2% and Nasdaq futures slide 0.3%. Pre-mkt, Memory / Semis are leading the Tech tape after a stronger APAC Tech session; Mag7 / Software are lagging. Cyclicals are seeing broad-based strength. Defensives are lagging with HC seeing profit-taking. Momentum continuing to unwind has triggered reversals lower from pre-mkt strength, over the past few sessions. This appears to be quant / systematic rather than discretionary players with Goldman pointing to the biggest systematic one-day loss since 2023. Retail activity remains muted. USD is mixed, erasing much of its earlier weakness as yields surge. Commodities are led by Energy as Brent moves towards $95/bbl, base metals outperform precious, with Ags are mixed. US economic data calendar includes weekly jobless claims, the Philadelphia Fed business outlook and leading index. Fed speakers scheduled for the session include, San Francisco Fed President Mary Daly and St. Louis Fed President Alberto Musalem.
In premarket trading Mag 7 stocks are mostly lower (Alphabet -0.3%, Amazon -0.3%, Apple -0.08%, Meta +0.4%, Microsoft 0.0%, Nvidia +0.2%, Tesla -0.7%)
Cryptocurrency-linked stocks climb as Bitcoin’s rally unleashed the biggest wave of short liquidations in records going back to 2021. The stocks were also boosted as President Donald Trump met with crypto executives from firms including Coinbase, Payward and Blockchain.com.
Advance Auto (AAP) tumbles 15% after the parts provider reported second-quarter sales that fell short of analyst estimates.
Alibaba ADRs (BABA) fall 3% after the Chinese internet giant reported weaker-than-expected revenues for its core domestic e-commerce business
Coty (COTY) falls 14% after the beauty conglomerate refrained from providing full-year guidance, predicting a “transition” period in the current fiscal year.
Ethan Allen (ETD) rises 3% after the home furnishings company declared a special cash dividend of $3 a share.
Nordson (NDSN) rises 5% after the maker of applicators used to dispense adhesives boosted its adjusted earnings per share guidance for the full year.
Ultragenyx Pharmaceutical (RARE) rises 7% after the drugmaker received accelerated FDA approval for its gene therapy to treat a rare genetic metabolic disorder.
Valvoline (VVV) climbs 1% after getting a new bull as Benchmark starts coverage of the operator of quick-oil-change stations with a buy rating, saying the stock is at an attractive entry point for investors.
Walmart (WMT) falls 6% as quarterly sales fell short of expectations, a rare miss that’s likely to stoke concern about the leading big-box retailer decelerating alongside a slow-growing US economy.
Webull (BULL) climbs 11% after the digital investment platform reported second-quarter results that beat expectations.
Wolfspeed (WOLF) falls 8% after the semiconductor-device company’s fourth-quarter results were seen as disappointing.
In other corporate news India’s securities regulator banned a Mauritius-based unit of JPMorgan from its capital markets, the first enforcement action over alleged manipulation of the country’s new closing auction for stock price. Apple’s camera-equipped AirPods remain on track for 2027, despite a leak from the company indicating that the product might arrive sooner. Starlink has reapplied to India’s space regulator for approval of its Gen 2 satellite constellation, which includes direct-to-device connectivity, ET reports.
Under the hood of quiet, low volume trading, there have been some significant thematic rotations. Perceived AI losers have rallied, high beta losers spiked, while high beta momentum have extended their historic collapse and are now just shy of their July lows. In fact, according to Goldman Prime, systematic funds just suffered their worst drop on Wednesday since 2023 as Nasdaq volatility remains very elevated, despite the apparent surface calm.
With so much focus on AI, traders will seek clues from Alibaba results. Headline first quarter revenue was at 268.95B Yuan, roughly matching consensus. The stock had run hard Into the print, considered among the best-placed Chinese AI developers to turn increasingly capable models into revenue, with Qwen’s near-frontier agentic performance at lower prices than leading US models.
Elsewhere, Brent rose for a fifth straight day, topping $94 a barrel after Trump announced a package of measures intended to smother Iran’s economy, dimming prospects for both an imminent breakthrough in the conflict between the US and Tehran and a normalization of crude flows from the Middle East.
Traders are taking stock after Treasury Secretary Scott Bessent announced a surprise increase in long-term bond buybacks to stem a rise in yields that had taken them to a near two-decade high. When it comes to Bessent’s plan to increase buybacks of longer-dated debt, Vital Knowledge founder Adam Crisafulli says “the Treasury action is somewhat minor and insignificant compared to the powerful secular forces pushing yield higher,” and JPMorgan sees credibility risk from the actichion. And with many warning the plan may be a short-term fix given concerns about large fiscal deficits and oil-driven inflation, that has already been realized as yields rise above where they were before the intervention yesterday!
“If there’s a structural reason why bond yields are drifting higher, a bit of short-term intervention buys you a little bit of time, but doesn’t necessarily change the longer-term trajectory,” said Graham Secker, equity strategy head at Pictet Wealth Management.
Elevated yields have kept equity prices in check, with the S&P 500 down since Monday after hitting a record high last week. Chipmakers have been under pressure in recent days, paring this month’s rebound after a volatile July.
In politics, a group of Democratic lawmakers are urging Fed Chair Warsh to disclose any conversations he has had with Trump since taking over the central bank in May. The Trump administration is poised to reduce tariffs on automobiles imported from Canada to 15% from 25% as part of a broader deal that would see the US neighbor drop retaliatory trade measures. Meanwhile, Norway is bracing for more tariffs from the US after talks on trade in Washington.
In Europe, the Stoxx 600 was down 0.1% and on track for a seventh day of losses, its longest losing streak of 2026 as energy firms outperformed as Brent crude rose toward $94 a barrel. Here are the biggest movers Thursday:
Novonesis shares climbed as much as 11%, the most since October 2015, after the Danish maker of industrial enzymes beat expectations in the second quarter and upgraded its guidance for the full year
Sartorius rose as much as 6%, the most in six weeks, after the stock was upgraded to buy from neutral at UBS
Sartorius Stedim Biotech climbed as much as 6.7%, the most in more than four months, after the stock was upgraded to buy from neutral at UBS, which cited a “positive setup into 2027”
Michelin shares rose as much as 2.5% and Nokian Renkaat gains as much as 6.4% after JPMorgan upgraded both tire stocks, citing favorable earnings potential
Ferrovial shares rose as much 4%, the most since April, after a consortium led by the infrastructure company was selected to deliver Tennessee’s I-24 Choice Lanes project in Nashville
JD Sports declined as much as 16%, the most since November 2024, after sales fell in the second quarter and the sports apparel retailer lowered its full-year profit before tax forecast to account for underlying sales trends and the promotional market backdrop
Steel stocks SSAB and Norsk Hydro traded lower while ArcelorMittal pushed higher as people familiar with the matter said a potential trade deal between the US and Canada could lower tariffs on certain Canadian exports of steel and aluminum to 25%
Orkla fell as much as 7.6%, the most since May, after the Norwegian consumer goods firm reported its latest earnings
Aryzta shares fell as much as 8.5% to the lowest since 2022 after UBS cuts the Swiss baker to sell, expecting the past year’s flattish volume growth to continue into and beyond 2026
Trainline dropped a further 8.8% on Thursday, extending strong declines after Wednesday’s announcement of a UK competition watchdog investigation into so-called drip pricing, as JPMorgan cuts its price target to a new Street-low
Aegon shares fell as much as 4.5%, the worst drop since March, after the insurer released interim results
Asian stocks climbed, led by gains in South Korea, as a drop in global bond yields after the US signaled increased Treasury buybacks eased concerns over high borrowing costs. The MSCI Asia Pacific Index advanced 1.8%, led by SK Hynix and Samsung following buyback reports. Korea’s benchmark rallied 5.9% while Japan and Hong Kong also rose. The drop in yields has reignited the artificial-intelligence rally after higher cost concerns briefly interrupted the recent tech advance thanks to strong earnings. Fresh reports of new business growth added to the momentum. Samsung Electronics rallied more than 5% after MoneyToday reported the chip giant will announce a shareholder return program soon. Meanwhile Reuters also reported the firm plans to raise some prices, lifting Taiwanese memory chip peers. SK Hynix jumped 4% after the company unveiled plans later on Wednesday to buy back 40 trillion won ($29 billion) of shares and return more profits to investors.
With little on the calendar for the rest of the week and holiday-thinned volumes, traders are looking to Nvidia’s earnings next week for a fresh read on the state of the AI buildout. “People are waiting for either new information or the market signaling something,” Secker said. “When you see the Korean market going up 5% and then down 5% the next day, particularly for the hedge fund community that level of volatility is not encouraging confidence.”
Traders will also be keen to hear remarks from Federal Reserve Chairman Kevin Warsh at the annual Jackson Hole symposium next week. His lack of guidance on when or whether the central bank will adjust rates has added to uncertainty over the policy outlook.
In FX, the dollar slide has continued with the credibility concerns triggered by yesterday’s buyback announcement flowing through to today’s trade and sending the Bloomberg Dollar Spot Index to its lowest level since mid-May, lifting EUR/USD onto a 1.17 handle. The pound headed for its highest level against the dollar since February, while the euro also gained ground.
In rates, treasuries are fading as higher oil prices push up US government yields by 4 to 5 basis points. In fact, yields have now erased almost all of yesterday's Treasury intervention. US 10-year yields trade around 4.70%, higher by 6bp on the day with bunds outperforming by 6bp and gilts up 3bp in the sector. A rally spurred by Wednesday’s Treasury buyback proposals has run out of steam just one day later, with the 30-year back to 5.24% erasing its entire 9bps drop from the prior session. Gilts are also on the defensive while Europe is mixed, with German bunds trading a touch firmer. Treasury auctions include a $8bn reopening of a 30-year TIPS sale. The WI 30-year around 2.98% is some 50bps above the February sale stop-out as the price of oil has risen ~40% over the period
In commodities, WTI futures higher by around 2.8%, adding to underperformance of Treasuries versus G10 rivals, rising to highest levels since July 24, as the US seeks to isolate Iran and its economy. Brent crude prices advanced for a fifth day above $94 a barrel, reaching the highest this month. Precious metals are failing to capitalise on the softer dollar with spot gold and silver posting respective losses of 0.7% and 0.6%. Bitcoin has built on yesterday’s rally, up 4%.
US economic data calendar includes weekly jobless claims, the Philadelphia Fed business outlook and leading index. Fed speakers scheduled for the session include, San Francisco Fed President Mary Daly and St. Louis Fed President Alberto Musalem
Market Snapshot
Top Overnight News
The US’s national debt has hit a record $40tn as borrowing rises at a historic pace, fuelling investor concerns about the state of America’s public finances despite Donald Trump’s vow to bring spending under control. FT
Scott Bessent’s shock Treasury intervention reverberated through markets, with analysts warning his plan risks being a short-term “circuit breaker” at best. Underscoring jitters, long end US yields edged higher. Bessent is emerging as the most interventionist Treasury chief in decades. BBG
The US will begin what Donald Trump called “unprecedented” economic warfare against Iran after failing to reach a deal. He gave no details but also threatened to target Iran’s trading partners. Brent rose above $93. BBG
The U.S. military has quietly established a shipping corridor in and out of the Strait of Hormuz to transport millions of barrels of oil each day — a notable success even as the broader war remains at a stalemate. Axios
In the battle for global technological mastery being fought in the labs of AI companies, China is rapidly closing the gap with the US. By several key metrics — usage and cost — it’s even taking the lead. BBG
North Korea has fired a barrage of ballistic missiles, just hours after dismissing US President Donald Trump’s overture to reopen diplomatic contacts between Pyongyang and Washington. FT
The U.S. and Canada are closing in on a trade deal in which Washington could cut some contentious tariff rates on Canadian-built cars and trucks, and key metals, a source familiar with the matter said on Wednesday. RTRS
Four Democratic senators have written to Kevin Warsh urging him to disclose any conversations he has had with Trump since becoming Fed chair, according to people familiar. BBG
Japan’s exports expanded at the fastest pace since 2022 last month, rising 23.2% from a year earlier as a weaker yen and strong demand for chips and cars boosted shipments. BBG
Mutual fund cash balances sit near historical lows. Following a brief increase around the start of the US-Iran war, mutual fund cash balances stood at 1.2% of assets at the end of June. Cash balances reached a low of 1.1% in December 2025. Goldman
A more detailed look at global markets courtesy of Newsquawk
APAC stocks were predominantly higher following a similar positive lead from Wall Street, where most of the major indices gained as yields and the dollar declined after the US Treasury doubled buybacks of long-term bonds. ASX 200 marginally gained with outperformance seen in miners and as participants digested a slew of earnings updates, although the upside is capped as financials lagged, and following disappointing jobs data. Nikkei 225 was underpinned by a rebound in tech, a pullback in yields and stronger-than-expected trade data. KOSPI led the advances in the region amid upside in the tech heavyweights, with SK Hynix shares up double digits following the announcement of a KRW 40tln share buyback, while there were reports that Samsung Electronics is planning to announce a shareholder return plan topping KRW 100tln. Hang Seng and Shanghai Comp conformed to the positive mood but with gains capped amid a deluge of earnings updates and as participants await Alibaba's earnings report, while the mainland is also contained after the PBoC kept its 7-day reverse repo operations at zero, and it maintained the benchmark Loan Prime Rates at their current levels for the 15th consecutive month.
Top Asian News
Japan's METI reportedly plans to request around JPY 7.7tln for its FY27 budget, which is a significant boost from its FY26 allocation.
European bourses trade mixed, with underperformance in Germany's DAX 40 (-0.6%) while the majority of other indices are flat/slightly firmer. European sectors point to a mixed picture. Autos top the sector pile, with Construction and Utilities rounding out the top 3 performers. To the downside is Basic Resources, paring back some of Wednesday's gains. Telecoms and Travel & Leisure round out the sector laggards.
Top European News
German PPI (Jul MM) 1.1% vs. Exp. 0.7% (Prev. -0.3%).
German PPI (Jul YY) 3.0% vs. Exp. 2.7% (Prev. 1.8%).
FX
Quiet action in FX after broad based USD weakness vs all peers on the surprise Treasury announcement yesterday, an update which led to significant curve flattening with the 30yr yield falling in excess of 10bps. Although the figure announced by the Treasury was modest, it shows Bessent’s commitment to keeping yields in check when above 5% in the long segment; alongside this, FOMC minutes encouraged some dovish action in shorter dated USTs. Yields will remain in focus and we have Fed speakers Daly and Musalem set to speak on business TV later today, likely to be asked on this topic. USD action is mixed against G10 peers, weaker vs. cyclicals, firmer/flat vs havens. DXY is modestly weaker after slipping below May’s support around 98.80, it is essentially no man's land below with 98.00 the likely next support.
SEK weakness after the Riksbank announcement which, in short, was broadly as expected but failed to convince some market expectations of tightening later in the year (i.e. Danske expecting two hikes, JPMorgan seeing one). While keeping the door open to tightening later in the year, some dovish leads can also be interpreted from the mood of language on the economy, where the reiterated language comes despite a rebound in domestic GDP. EUR/SEK moved higher throughout the morning to a peak just below 11.06, +0.4% on the day.
Action elsewhere is quiet. AUD is towards the bottom of the G10 pile despite the constructive risk environment; underperformance a function of disappointing jobs data in which headline Employment Change contracted and the Unemployment Rate rose. AUD/NZD fell in excess of 40 pips after the data, selling which was halted just under the 1.1950 mark, AUD/USD is flat despite a kneejerk lower after the data.
Fixed Income
Fixed income benchmarks are lower/flat. Yields are firmer across the curve this morning, albeit only mildly so. This comes after the curve flattened in the prior session, following the US Treasury’s decision to double long-end buybacks, attempting to provide greater liquidity support. However, by all intents and purposes, markets have received the news as the Treasury being concerned about recent elevated yields. Some will also point towards the recent US-Japan cooperation on JPY intervention; whilst unlikely to be a main factor for the Treasury’s buy-back announcement, the timing is interesting.
For now, yields are off recent peaks, but still remain towards multi-year highs. Fiscal concerns continue to remain the theme, with the US gross national debt now above the USD 40tln mark. The US30yr (5.22%) holds beyond the 5% mark, whilst the US10yr (4.66%) remains above the key 4.5% mark. ING opines that it is “unlikely” that the 10yr will fall below 4.5%, but believes it is “clear” that any move above 5% “or even the material threat thereof” would receive active resistance by the US Treasury.
The key dates to watch are as follows: September 9th (the new doubled buyback goes into effect) and then November 4th (next QRA, where the current program window ends, and the Treasury will provide more updates on sizes/frequency).
Bunds (+3 tick) and Gilts (-8 ticks) remain flat/lower, in what has been a quite domestic newsflow session for the respective regions. On a macro level, energy benchmarks continue to rise (Brent Oct’26 +2.5%), with the latest bout of geopolitical updates indicating a resurgence of hostilities in the Middle East (see commodities for details).
France sells EUR 12.5bln vs exp. EUR 10.5-12.5bln 2.40% 2029, 2.70% 2031, 3.25% 2032 and 3.00% 2034 OAT.
Japan sells JPY 532.1bln 20-year JGBs; b/c 3.98x (prev. 4.52), average yield 3.698% (prev. 3.626%), tail in price 0.17 (prev. 0.00).
Commodities
WTI and Brent October futures are firmer intraday amid a slew of geopolitical updates, with the headline developments being Trump announcing economic measures and Iran threatening to withdraw from the NPT (details below). Modest downticks were seen after Al Arabiya reported that US President Trump "told his negotiating team that the chances of an agreement with Iran have become slim", with the downside possibly as traders take these reports with a pinch of salt, as it is highly unusual for local Arab media outlets to break major source reports directly from inside a US admin before domestic US media outlets. Since then, prices have resumed an upward trend, with Brent currently sitting near its session high in a USD 91.47-94.04 range (vs yesterday’s USD 92.81/bbl high) and WTI similarly towards the upper end of a USD 84.23-86.61/bbl band (vs yesterday’s USD 85.84/bbl peak). Dutch TTF futures post modest gains but remain above EUR 64/MWh after trading north of EUR 64.50/MWh in early trade and then finding support just under EUR 63.50/MWh.
Metals are softer across the board despite the softer USD as the complex pulls back from yesterday’s US Treasury-induced gains whilst also feeling the weight of higher oil prices. Spot gold has fallen back under its 200 DMA (4,512/oz) to trade towards the bottom of a USD 4,478-4,524/oz range (vs yesterday’s 4,325-4,524/oz parameter). Spot silver resides towards the bottom of a USD 66.40-67.32/oz range. Elsewhere, 3M LME copper briefly tested USD 14k/t to the downside to trade in a current USD 13,980.68-14,083.00/t range.
Trade/Tariffs
The US is reportedly set to cut the tariffs on imported Canadian autos to 15% from 25%, Bloomberg reported.
Central Banks
The Riksbank maintained its rate at 1.75% as expected and assesses that the probability of a rate increase later this year remains. The Bank stated that the outlook for the economy remains largely unchanged but that if the unexpectedly high inflation during the summer were to be the start of a larger and more lasting upturn in inflation, the Riksbank would adjust its monetary policy in a tighter direction.
In the post-policy press conference, Riksbank's Thedeen said they are somewhat concerned about the recent inflation outcomes and that the economy is showing signs of strength.
Geopolitics: Middle East
US President Trump posted "No one has given the Islamic Republic of Iran a greater opportunity to make a Deal than me. TRAGICALLY, for them, they have failed to take it. Therefore, today, I am announcing the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY! This will be Economic Warfare and Isolation on an unprecedented scale. Trump added that "ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences. Oil smuggling, swap lines, cash transfers, exchange houses, ship registries, front companies — It all needs to stop NOW. You know who you are. This will be an ECONOMIC D-DAY".
US President Trump reportedly told his negotiating team that the chances of an agreement with Iran have become slim, according to Al Arabiya, citing sources. The source added that Trump ordered a freeze on negotiations with Iran for several weeks, with the possibility of extending them. Additionally, the report added that the US administration saw reports of an Iranian plan to resume attacks on ships and was briefed on information regarding a potential Houthi escalation in Bab al-Mandab and on an Iranian plan for operations that go beyond targeting ships. Trump informed his team of the possibility of launching massive attacks on Iran if economic pressure fails.
Iranian Foreign Minister Araghchi said that insisting on failed policies will only lead to more failures and will lead to hostility from Iranians.
Iranian Supreme Leader adviser Rezaei said the best response to Trump's escalation of economic warfare is to withdraw from the NPT.
The US administration believes that the Iran-Oman discussions broke down weeks ago, according to Semafor citing an official source.
Iranian Foreign Minister Araghchi held talks with Pakistan's Army Chief on regional developments, with the two sides discussing ongoing diplomatic initiatives, potential political solutions and ways to deepen consultation and cooperation.
Yemeni sources reported that Houthis are preparing to enter a new phase of escalation against Saudi Arabia, according to Tasnim.
Israeli warplanes attacked the Tal al-Dabsha area northwest of Ali al-Taher Hill in southern Lebanon, according to IRIB news.
Turkish Defence Ministry said that they will continue to support Syria's efforts to develop their own military capability.
Geopolitics: Ukraine
Russia attacked military facilities and a logistics hub in Kyiv and the region, while it also hit a drone component production facility in Kyiv, according to Russian press, quoting the Defence Ministry.
Several explosions were heard in central Kyiv, Ukraine, according to witnesses. This was later confirmed by the Kyiv Mayor, stating the city is under attack from Russian ballistic missiles.
Polish Armed Forces said the Polish military activated aircraft and air defences as Russia carried out strikes on Ukraine.
Geopolitics: Other
Japan said North Korea fired what could be a ballistic missile, which was later announced by South Korea, stating that North Korea's military fired an unidentified projectile towards the east sea. The missile has landed outside of Japan's Exclusive Economic Zone
US Event Calendar
8:30 am: Aug Philadelphia Fed Business Outlook, est. 24.75, prior 41.4
8:30 am: Aug 15 Initial Jobless Claims, est. 210k, prior 209k
8:30 am: Aug 8 Continuing Claims, est. 1788k, prior 1777k
10:00 am: Jul Leading Index, est. 0.1%, prior -0.2%
Central Bank speakers
8:30 am: Fed’s Daly Appears on Bloomberg TV
11:10 am: Fed’s Musalem on CNBC
DB's Henry Allen concludes the overnight wrap
Markets finally recovered again yesterday, with a big rally for long-end Treasuries after the US Treasury Department announced an increase in its buyback operations. The unexpected move dominated the market agenda, with 30yr Treasury yields (-9.2bps) posting their biggest decline since June, to close at 5.19%, with a further move lower overnight to 5.18%. But whilst the measures led to a pullback in long-dated yields, concerns about financial repression also meant that gold prices (+4.18%) had their biggest gain since March, whilst the dollar index (-0.83%) fell to a three-month low. So the announcement had big effects across multiple asset classes.
That announcement from the US Treasury said they were going to increase “by at least double”, the size of their buyback operations for longer-dated Treasuries. So that covers 10-20 year maturities, and 20-30 year ones too, taking the maximum size from $2bn per operation to at least $4bn. They said that would kick in from September 9 and be effective for the rest of this refunding quarter, which goes up to November 4. The news took investors by surprise as well, because it was just two weeks earlier that the Treasury had released their tentative buyback schedule for the upcoming quarter as part of their regular refunding announcement.
Admittedly, the increase in buybacks isn’t a particularly big amount relative to the number of outstanding Treasuries. But it offers a signal that officials are willing to support the long end, not least after the 30yr Treasury yield closed at a post-2007 high of 5.31% on Monday. So that led to a significant flattening of the yield curve yesterday, with the 2s30s slope (-8.5bps) also seeing its biggest daily decline in the last couple of months.
Elsewhere, the announcement also led to a sharp weakening in the US dollar, which fell against every other G10 currency yesterday. Deutsche Bank’s George Saravelos published a note yesterday (link here), in which he argued that the buyback represented a soft-form financial repression policy aimed at containing the long-end of the US yield curve, and this was negative for the dollar. His case is that if the market price of US Treasuries isn’t “allowed” to adjust lower, then the foreign exchange price of Treasuries owned by foreign investors has to adjust via a weaker dollar. He also points out the parallels with the Fed’s Operation Twist of the early 2010s, back when the FOMC sold short-term securities to purchase longer-dated Treasuries, in order to lower long-term rates.
Speaking of the FOMC, the minutes of the July meeting were also released yesterday. They said that “many participants assessed that policy tightening would likely be necessary if inflation did not decline”. So that confirmed a hawkish bias, but the wording “many” is typically used for a group that is shy of a majority, so it fell short of an imminent hiking signal. As a result, investors dialled back the likelihood of a September rate hike, with market pricing falling from 35% to 32% over the session. And looking further out, the number of hikes priced by December fell -1.5bps on the day to 22bps, its lowest since Warsh’s first FOMC meeting in June, which was unexpectedly hawkish. Overall, that left 2yr yields -0.8bps lower on the day at 4.16%, having been as high as 4.20% just before the minutes’ release. Still, given the US Treasury buyback announcement, the rally was much bigger at the long-end, with 10yr yields down -5.7bps to 4.65%.
As all that was happening, there were few signs that broader inflationary pressures are disappearing either. Indeed, yesterday saw Brent crude oil (+0.66%) post a 4th consecutive gain to close at $91.62/bbl, and overnight there’s been a further +0.37% increase to $91.96/bbl. That comes as President Trump posted overnight that he was announcing the “MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY!”, which he said would be “Economic Warfare and Isolation on an unprecedented scale.” In addition, he said that “ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences.” Otherwise, there’s still no sign of any talks between the US and Iran, and when Trump was asked whether talks would resume, he said “maybe at some point”. Meanwhile, the ongoing blockage of the Strait of Hormuz meant investors priced in more inflation as well, with the 1yr US inflation swap (+3.6bps) and the 1yr Euro inflation swap (+0.5bps) both moving higher yesterday.
For equities, the last 24 hours have seen a relatively better performance, with the S&P 500 (+0.21%) finally ending a run of 3 consecutive declines. That was primarily driven by the sharp decline in long-end yields, and S&P 500 futures saw a clear move higher following the US Treasury’s announcement. On top of that, there were huge gains for Moderna (+176.97%) and Merck & Co. (+12.60%) after they announced successful trial results for a skin cancer vaccine, which led the S&P 500 healthcare sector (+3.52%) to its best day since April 2025. In fact, US equities would have seen an even stronger performance were it not for a fresh decline in chip stocks, with the Philly semiconductor index (-2.12%) losing ground again.
That positivity has also been clear overnight, with S&P 500 futures up another +0.17%, whilst the major indices in Asia have also moved higher. That includes a sharp bounceback for the KOSPI (+6.25%), alongside gains for the Nikkei (+1.18%), the Hang Seng (+1.14%), the Shanghai Comp (+0.28%) and the CSI 300 (+0.21%). Moreover, we’ve seen fresh gains for bond markets, with Japan’s 10yr yield coming down -4.8bps this morning, whilst Australia’s is down -5.3bps.
Earlier in Europe, markets didn’t do as well as their US counterparts, as they didn’t directly benefit as much from the US Treasury announcement, and were more exposed to the latest gain in energy prices. So equities struggled, and the STOXX 600 (-0.11%) posted a 6th consecutive decline for the first time since 2023. Meanwhile for bonds, there were fresh multi-year highs for several yields. For instance, the German 5yr yield (+1.2bps) hit a post-2008 high of 2.99%, with France’s 5yr yield (+0.5bps) also at a post-2008 high of 3.51%. The 10yr horizon was more mixed however, with the 10yr bund yield (+0.2bps) inching up to a post-2011 high of 3.26%, whilst yields on 10yr OATs (-0.5bps) and BTPs (-1.7bps) came down a bit.
In trade news, the US and Canada are continuing to work towards a deal after the US postponed their tariffs by 3 days. Bloomberg reported that it would see US tariffs on Canadian autos fall from 25% to 15%, with steel and aluminium tariffs falling from 50% to 25%. However, the report also said the details were yet to be finalised.
Finally, there was very little data yesterday, but we did get the UK CPI print for July. That showed headline CPI rising to +2.9% as expected, whilst core CPI remained at +2.6% (vs. +2.5% expected).
Looking at the day ahead, data releases include German PPI for July, the US weekly initial jobless claims, and the Philadelphia Fed’s manufacturing business outlook survey for August. Central bank speakers include the Fed’s Musalem and the ECB’s Sleijpen. And today’s earnings releases include Walmart.
Tyler Durden
Thu, 08/20/2026 - 08:29