As the powers gathered in Washington, seemingly for pleasantries over progress, there was considerably less diplomacy in bond markets. Yields higher again.
A confluence of factors soured appetite for bonds on Wednesday, as Flash PMIs showed business activity was running at its fastest pace since July 2021, and a 5-year auction drew weak demand, alongside a further move higher in global yields.
In equities, semiconductors and hyperscalers did the heavy lifting. Meta Platforms (META US) soared 11% after its Muse AI agent became the most-downloaded product on the US Apple App Store. As a result, the broader Nasdaq 100 Index closed at a record on Tuesday for the first time since June. Yields eased, and oil fell anew on Friday amid hopes the Strait of Hormuz would reopen, allowing the S&P 500 to extend its weekly advance.
The dollar approached a YTD high as yields pushed higher, with carry-sensitive FX especially volatile through the week, hinting that the market may see the USD higher for the longer term. One-week risk reversals widened to 54bps, the most since April, to capture this week’s payrolls data.
One small FYI for Substack app users, we’ll be joining a live podcast with Prometheus Research on Wednesday, September 30, at 12:00pm EDT. We’ll be talking through FX, bonds, and some recent market events. You can set a reminder for the conversation here.
Below the paywall, we focus on one important question many clients have asked over the last week: can equities withstand yield pressure?
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Let’s get into the guide to trades moving markets, where things stand, and where they may be heading.
“Hurdling a High Bar”
“One Eye On Midterms”
“Summary of House Views”