If You're Still Talking About Central Bank Independence, You Are Behind The Curve
By Michael Every of Rabobank
The US just hit five more Iranian oil tankers, citing attempted strikes on one of its warships, and warned more will be sunk if Iran tries it again. It also imposed more economic war via aviation sanctions. The Saudis and Houthis are on the brink of new war after a series of strikes at Saudi cities, followed by Riyadh’s reprisals and the threat of “consequences [the Houthis] cannot handle.” Qatar and the UAE both said the Gulf cannot rely on US alone for the region's security: but Russia can’t extend power there now; China can’t or doesn’t want to; Europe can’t and won’t – so that leaves Turkey and Israel, both eyeing the other suspiciously; and as France and Canada joined the UK in issuing trade sanctions on Israeli settlements, the EU reportedly wants to pursue closer Israel ties on air defence and space.
Oil trades above $100, and notably Shanghai oil is now trading higher than Brent having been vastly lower in the early stages of the Iran War. Crack spreads remain worryingly high all over. Refined product stocks remain worryingly low.
Shanghai crude $110: contract record high pic.twitter.com/gWCza5BD2M
— zerohedge (@zerohedge) September 9, 2026
Trump spoke to Putin as Hungary expelled 10 Russian diplomats to Moscow’s threats of a harsh response. Iceland summoned the US ambassador over Trump’s Stars and Stripes map Truth post showing the US flag covering Canada, Mexico, Greenland, and Iceland. Israel shut down the UK consulate in Jerusalem. The British Army has reportedly been ordered to save money by using reservists less, and flights were grounded across the UK due to a tech issue – showing the impact ‘grey zone’ attacks can have. The Hong Kong press notes China is boosting Pakistani drone defences ‘as India tensions simmer’, and ‘How Japan is digging in to deter –and withstand– a conflict over Taiwan.’ All the kind of things to rattle the long end of government bond yield curves.
Maritime nations are warning that global shipping rules are collapsing, which could take much global trade with it as some worry if there is enough bunker fuel for the ships to use. While the Suez Canal is seeing more passages as tankers try to avoid Hormuz, the Panama Canal is warning of deeper transit cuts as the El Nino drought threat intensifies. Further north, and next to Europe, Russia is betting on a $400bn Arctic Transport Corridor but can’t fund it without China.
Brussels warned China it ‘must buy more’ from the EU to avoid a trade war: but what exactly? The old joke vs. the US was ‘Will you sell us aircraft carriers?’ China now builds its own faster. Europe has few resources China needs or goods it doesn’t make itself. Even EU luxury brands are less popular as Beijing prioritises domestic brands. Perhaps the EU could sell China more tech from ASML, to a new trans-Atlantic storm? Meanwhile, EU industry claims it faces 300,000 job cuts as China “colonises” its supply chains, and European “wealth” is threatened by the decline of its carmakers, with a deleterious effect on the steel, aluminium, glass, and chemical sectors needed for rearmament. Again, not much fun for the long end of bond markets if they think about it.
Canadian counter tariffs on the US went into effect; the US is to ban Canadian dairy and some alcohol and motor vehicles from September 29, as well as Canadian firms from government contracts in response. The Globe and Mail opines, ‘With this trade war, Canada faces its Singapore moment’. The National Post says, ‘Canadians support hard line against US, but don't want to pay for it’, as “When asked if they would pay an extra C$500 per year to hold the line in the current trade war, 56% called this ‘unacceptable’.” Becoming Singapore implies paying vastly more than C$500 per year.
US Secretary of State Rubio is seeking more economic and security ties in Latin America, which has an FTA with the EU, which doesn’t offer the same security ties. He’s in Colombia to ‘clarify’ its China links and to sign a minerals deal, as Nicaragua hands a gold concession to a sister firm of US-sanctioned Chinese miner.
In AI, there are more reports about experts fearing the technology is out of control, as markets worry about the same issue from a different standpoint. The US also accused Chinese AI firms of “malicious” copying of AI technology – which can be resisted how if so, a digital Iron Curtain? Despite fears of US-South Korean tensions, as opposed to alignment on rapprochement with North Korea, KHNP and the US Westinghouse are to align the two nations nuclear supply chains for eight new US reactors. That is a small step in the right direction regarding AI power demands.
In politics, anti-AfD protests swept parts of Germany as the establishment fears that Berlin and Mecklenburg-Western Pomerania may fall to the populists on 20 September. That’s as Politico says, ‘Merz has no good answers as the far right targets his downfall.’ Nothing for the bond market to worry about there, right?
In markets, there is some speculation the BOJ might even think about a 50bps hike. If so, it would be the first such move since 1989, when it was still in a bubble. Appropriately, given the current geopolitical backdrop, it was also before the3 first Cold War had fully ended and was a time when the US used national security arguments vs. its allies to achieve the likes of the Plaza Accord.
Indeed, US Treasury Secretary Bessent stated: “I am the house now, so when we intervene with the Japanese Yen, I have a pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policy makers are going to do. And you can bet against me if you want.” I repeat, if you are still talking about the independence of central banks, you are behind the curve; the world is now about the functional independence of countries within which central banks sit. Of course, as JPY rallies and shorter-dated JGB yields rise, the issue becomes when we might see Japanese holdings abroad repatriated, pushing FX down and yields higher in other markets. That might take some more economic statecraft, not “because markets”, from Bessent to handle.
The RBA just saw Hauser give a hawkish speech, which has markets thinking of hikes this month and in November. Fortunately, that’s very much what the US Treasury would like to see – plus a lot more action on non-housing parts of the economy.
ECB President Lagarde, who’s talked independently about economic statecraft yet done nothing, is to release her memoir in January. That’s odd given she will still be in office so can’t tell us anything interesting enough to justify reading it. Unless she has moved on to pontificate at Davos, as whispered. That would allow Macron to choose the replacement ECB representative before the French presidential election where the nationalist Le Pen is seen as favourite, a clear ‘rules’-based ringfencing of a ‘rules-based’ institution against at least one populist appointment. Yet when you see where the political winds are blowing, such action may not prove quite as reassuring for markets as the ‘sensible centrist’ optimists would try to sell it.
On the other hand, China's tobacco monopoly played a key role in shoring up state-owned banks, which just raised $54bn in capital even as GDP is sluggish. Where there’s smoking, there’s fire, but is the new capital for bad loans, a bad sign for global growth, or new “not because markets” lending, a bad sign for global inflation? Today’s Chinese CPI data were in line at just 0.8% y-o-y headline, up from 0.5%, and slightly above expectations at 1.0% y-o-y core, while PPI was 3.8% y-o-y vs. 3.6% consensus and up from 3.5%. Let’s see how all of them trend with Shanghai oil over $100.
Tyler Durden
Wed, 09/09/2026 - 13:20