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US yields drop from their highs following data as crude oil prices are eyed
U.S. Treasury Yields fell from a?multi-year peak on Wednesday. The benchmark 10-year yield is on track to end a five session streak of gains as investors assessed the 'latest round of data on the economy and crude prices fluctuated. Crude prices rose more than 1% after a?earlier 1% drop. Supply concerns from the Iran War overshadowed comments made by U.S. Energy Sec. Chris Wright who stated that 17 million barrels of crude oil passed through the Strait of Hormuz Monday. The ADP National Employment Report shows that private employment increased by 38,000 last month. This is below the 48,000 expected by the economists polled, following a revised upwards of 46,000 jobs in July. Thomas Urano is the co-chief investment officer of Sage Advisory, based in Austin, Texas. "Policy is becoming very difficult. Then you see data such as today's ADP number which showed a slow growth rate. All of a sudden, inflation and unemployment are not reading the same script. Then monetary policy becomes'really complex' when both stop pointing the same way. Urano stated that in addition to September being historically a difficult month, recent comments by Federal Reserve Chair Kevin Warsh, the continuation of the 'Iran war, which has increased energy prices, as well as capital spending by AI firms potentially crowding out the demand for Treasuries, have all served to push the yields higher. This data was released on Tuesday, after the Job Openings and Labor Turnover Survey revealed a slow-moving but stable job market. The government's payroll report will be released on Friday, and will provide a better understanding of how the Federal Reserve will set its interest rate policy. BENCHMARK YIELDS RECOVER FROM HIGHS The yield of the benchmark 10-year Treasury bill fell 0.2 basis points to 4.794%, and is on course to end its longest daily gain since March. The yield reached a previous high of 4,818%, which was its highest level since November 1, 2023. The Commerce Department also reported that factory orders increased 0.9% in July. This was above the 0.6% estimated, after a 0.2% decline in June. The 30-year bond yield remained unchanged at 5,267%, after reaching a high of 5,296% two weeks ago. John Williams, President of the Federal Reserve Bank of New York, said that rising long-term bonds yields were not driven by inflation fears but rather a reflection of an economy in good health. He also stated that he is still gathering information for his next "monetary policy decision". FED OFFICIALS SIGNATURE?RATE HACK OPENNESS In recent days, several Fed officials indicated that they thought a rate increase would be appropriate if inflation pressures continued. The part of the U.S. Treasury curve that is closely monitored, measuring the difference between the yields on 2-year and 10-year Treasury Notes, which is seen as a good indicator of economic expectations was positive at 40.9 basis points. CME FedWatch reports that 64.2% of respondents expect the central bank to raise interest rates by at least 25 basis point at its meeting in September. This is up from 36.6% one week ago. After climbing to its highest level since January 2025, the 2-year U.S. Treasury Yield, which is typically influenced by?interest rates expectations for Fed, dropped 1 to 4,384%. In its latest "Beige Book", the Fed stated that U.S. economic growth was modest, with employment rising slightly and prices increasing moderately over recent weeks. The 5-year U.S. Treasury inflation-protected securities (TIPS) broke even at 2.366%, after closing on Tuesday at 2.38%. This was its highest close since the middle of June. The 10-year TIPS Breakeven Rate was at 2,352% last, which means the market expects inflation to average 2.4% per year over the next ten years.
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Stocks rise after recent declines; Japanese yen jumps against US dollar
Investors awaited new developments in the U.S. - Iran conflict and the Japanese yen rose sharply against U.S. dollars. The yen's move was not immediately apparent. Over the past month, the currency has retraced approximately half of its gains made following a rare joint action by the U.S. On Wednesday, the yen rose by 0.92% to 158.72 dollars. Treasury yields in the United States have fallen from their multi-year highs. The increase in borrowing costs in major economies has heightened concerns over tighter monetary policies and worsening fiscal conditions. Investors remain focused on Iran a day after U.S. airstrikes on Iran prompted Iranian attacks against U.S. target?in the area, the most serious escalation of the conflict in weeks. Fears of further disruptions to energy supply led to a modest increase in oil prices. ?U.S. Crude was up by 0.62% to $90.79 per barrel. Wall Street stocks rose on September 1st after a rough start to the month due to the Middle East escalation and global bond sell-off. Rick Meckler is a partner at Cherry Lane Investments, a family-owned investment firm in New Vernon, New Jersey. He said investors may be searching for bargains following the recent selling. "The (U.S. economy) is still strong. One of the challenges?in stock investing is that high rates are often associated with a strong economy. You have to balance the good earnings against the possibility for competition that bonds offer. The Dow Jones Industrial Average rose by 289.55 points or 0.55% to 53,059.62. The S&P 500 gained 45.54 points or 0.60% to 7,677.30. And the Nasdaq Composite increased by 130.03 points or 0.50% to 26,230.25. After ending lower in the previous three sessions, MSCI's global stock index rose by 1.14 points or 0.10% to 1,143.91. The STOXX 600 Index fell by 0.21%. The yield on benchmark U.S. Treasury 10-year notes fell 0.2 basis points to 4.794%, and was on course to end its longest daily gain streak since March. The yield hit a previous high of 4,818%, its highest level since November 1, 2023. The yield on the Japanese 10-year government bond held above 3% for the second straight session, after reaching a three-decades high earlier in this week. Recent traders have increased their bets that the Federal Reserve will raise interest rates. Investors are looking forward to the Fed's meeting on September 15-16 to see if the economy is still strong enough to justify tightening monetary policy. The key monthly U.S. job report is due Friday. According to CME Group’s FedWatch tool, traders now give a two-in three chance that the Fed would increase rates by 25 basis points this month. This is up from 37% just a week ago. Markets will be watching closely the policy meetings of the European Central Bank (ECB) and the Bank of Japan to see how much they are willing to tighten their policies in response to the persistent inflation risk. Spot gold increased 0.9% to $4.367.68 per ounce.
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FOREX - Yen surges sharply; dollar falls from two-week-high
The yen jumped sharply on Wednesday against the dollar after retracing approximately half of its gains made at the end July following a rare U.S.-Japan joint intervention. The?move was not immediately understood. After the intervention, the yen rose as high as 155.21 per dollar, before giving up some of its gains. The yen last rose 0.94% to 158.67 dollars. Chris Scicluna is the head of Daiwa Capital Markets Europe's economic research. He said: "It would be convenient for the U.S. to conduct a rate review, following the Bank of Japan remarks this morning." Hajime Takata, a hawkish member of the BOJ Board, said that on Wednesday the central bank needed to act quickly to combat rising inflationary pressures and not follow a semi-annual rate increase schedule. Scicluna stated that it was difficult to determine the cause of the dollar/yen movement, but he suspected this to be more likely a rate-check than an intervention to change the trend. The recent intervention failed to?do so. A government or central banks asks financial institutions for a quote on the exchange rate, but they do not buy or sell. BOJ Governor Kazuo Ueda also indicated on Tuesday that there was a high chance of a hike in this month. Treasury Department reported that U.S. Treasury Sec. Scott Bessent expressed strong support for a "decisive" approach to combating yen weakening in a recent meeting with Ueda. Analysts say that although some factors suggest the possibility of an intervention on Wednesday, the size of this move was relatively small. "If there is an intervention, it tends to happen when the markets are thin." Hank Calenti is the chief strategist for global markets at SMBC EMEA. Takafumi Oonodera, First vice president at Mitsubishi UFJ Trust and Banking Corporation, stated that the yen has not gained as much as one might expect from a move by the government. He said that the magnitude of his move did not indicate direct market intervention. The wide difference between U.S. interest rates and Japanese rates has caused the yen to struggle to find support. On Wednesday, it traded back down to 160.39, its lowest level since the intervention. The drift above 160 indicates that the markets do not really see a foundation for the yen, said Eric Theoret. Currency strategist at Scotiabank. OIL RAISES INFLATION FEAR The dollar had been boosted earlier in the day by a spike in oil and a rise of benchmark 10-year Treasury yields, which reached a three-year peak. The dollar index fell 0.16%, to 99.52. The euro remained flat at $1.1591 on the same day. The dollar fell 0.11%, to $1.35. The oil price has fallen from the highs of earlier this week, which were more than a month old. Traders are weighing the risk of disruptions in supply after the overnight strikes between the U.S. There is growing concern that rising oil prices will feed through into consumer price inflation, which is already above target and increase the likelihood of Federal Reserve interest rates being raised. Kevin Warsh, Fed chairman, made a series of hawkish remarks on Friday that prompted traders to increase their bets?on an interest rate hike at the September 15-16 U.S. Central Bank meeting. Fed funds futures traders now price in 65% of a hike for September, up from just 35% prior to Warsh's remarks. The Canadian dollar rose after the Bank of Canada held its key policy rate at 2.25% as widely expected on Wednesday. However, the Bank of Canada said that inflation risks had increased and new U.S. Tariffs made growth prospects more uncertain. The Canadian dollar was up by 0.39% last at C$1.384. The New Zealand dollar fell after the central bank of the country raised interest rates on Wednesday for the second time in a row and indicated that more tightening would follow. However, it stressed that any future moves will be measured because the bank warned about mounting risks to economic outlook. The Kiwi fell 0.71%, to $0.5849.
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Russia announces no further obstacles to payments with India
A senior Russian banker revealed on Wednesday that India, the world's second largest importer of Russian oil, has built a functional payments infrastructure using roubles. India increased its imports of Russian oil at a discount due to Western sanctions, resulting in a record-breaking $70 billion trade between Russia and India in 2024. The bilateral trade dropped in 2025 when the sanctions were tightened, but recovered in the first half 2026. "There are no problems in the settlements between Russia & India." Ivan Nosov is the head of Sberbank India. He said, "I am prepared to say that this is a reliable and well-established mechanism for Russia's payments to other countries." Russian companies had complained before about the "overhang" rupees (a currency that is only partially convertible) in bilateral transactions as well as trade deficits. Indian exports were lagging behind Russian imports. Official data shows that 17 Indian banks and 22 Russian banks currently service bilateral trade. This includes Sberbank, Russia’s largest lender which was tasked with developing the payments infrastructure. Nosov stated that 90% of all transactions between Russia and India are processed in 10 minutes. More than 50% of the transactions are processed in less than a minute. When he met with President Vladimir Putin, Indian Prime Minister Narendra Modi celebrated the growing economic ties between India and Russia.
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US yields edge lower after data as crude prices slip
U.S. Treasury Yields eased on Wednesday from multi-year highs, with the benchmark 10 year yield set to end a five session streak of gains as oil prices fell and investors assessed the latest round economic data. Crude?prices dropped about 1% after U.S. energy secretary Chris Wright announced that 17 million barrels of crude oil had flowed across the Strait of Hormuz Monday. The ADP National Employment Report shows that private employment increased by 38,000 last month. This is below the 48,000 expected by the economists polled, following a revised upwards of 46,000 jobs in July. Thomas Urano is the co-chief investment officers at Sage Advisory, a firm in Austin, Texas. "We are in a situation where policy is very difficult. Then you see data such as today's ADP number which was a miss and showed a?fairly slow pace of expansion. All of a sudden, inflation and unemployment are not reading the same script. Then monetary policy becomes'really complex' when both stop pointing the same way. Urano stated that in addition to September being historically a difficult month for the markets, recent comments by Federal Reserve Chair Kevin Warsh, on Friday, continued?of Iran war, which has increased energy prices, as well as capital spending by AI firms potentially crowding out the demand for Treasuries, have all served to push yields higher. This week's data on the labor markets was released after the Job Openings and Labor Turnover Survey, which showed a slow-moving but stable job market, had been released Tuesday. The government's monthly payroll report will be released on Friday, and will provide valuable insight into the Federal Reserve's policy. BENCHMARK YIELDS RECOVER FROM HIGHS The yield of the benchmark 10-year Treasury bill fell 0.2 basis points to 4.794%, and is on course to end its longest daily gain since March. The yield reached a previous high of 4,818%. This was its highest level since November 1, 2023. The Commerce Department reported that factory orders rose 0.9% in July. This was above the estimate of 0.6%, following a 0.2% decline in June. The 30-year bond yield dropped 0.1 basis points to 5.266%, after reaching a high of 5.296% two weeks ago. John Williams, President of the Federal Reserve Bank of New York, said that rising long-term bonds yields were not driven by inflation concerns but rather reflected a strong?economy. He also stated that he was still gathering information for his next monetary decision. OPENNESS IS COMMANDED BY FED OPERATORS AFTER RATE HITCHES In recent days, several Fed officials indicated that they thought a rate increase would be appropriate if inflation pressures continued. The gap between the yields of 2-year and 10-year Treasury Notes, which is viewed as an indicator of expectations for the economy, was positive by 40 basis points. According to CME FedWatch, 64.2% of respondents expect the central bank to raise interest rates by at least 25 basis point at its meeting in September. This is up from 36.6% one week ago. The yield on the?2-year U.S. Treasury, which moves typically in line with expectations for interest rates from the Fed, dropped 0.2 basis points to 4.392%, after rising to 4.41%. It was at its highest level since January 2025. The 5-year U.S. Treasury inflation-protected securities (TIPS) broke even at 2.370%, after closing on Tuesday at 2.38%. This was its highest close since the middle of June. The 10-year TIPS Breakeven Rate was at 2,352% last, which means the market expects inflation to average 2.4% per year over the next decade.
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After a delay due to fire, Udokan in Russia has started producing copper cathodes.
Udokan Copper, a Russian mining company, announced on Wednesday that it had started production of copper cathode at its plant located in Russia's Far East almost three years after a fire delayed the start. Vladimir Putin, the President of Russia, joined in on the ceremony via video link. Udokan is the largest copper project in Russia. It is currently subject to U.S. sanctions. It started producing copper concentrates in September?2023. The operator planned to open a hydrometallurgical facility in the second quarter of 2024, which would produce 135,000 tons per year of copper in either the form of cathodes using the SXEW process or concentrate. The first phase of Udokan's annual capacity was to increase to 150,000 tonnes by 2026. This output would be destined for both the domestic market as well as exports to China. In December 2023, a fire damaged a part of the cathode-production?facility that was yet to be launched. Concentrate output however, was not affected. The sanctions against Moscow have made it difficult to import the mining and processing equipment required to replace damaged machinery. Udokan Copper, founded in 2008 to develop the Udokan Deposit, is part of the diversified USM Group. Russian billionaire Alisher USmanov is its largest shareholder. The second phase of Udokan is expected to produce around 550,000 tonnes of copper per year, making it potentially one of the five largest copper producers in the world.
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FOREX-Yen surges against US dollar
The Japanese yen rose sharply in value against the U.S. dollar. The?dollar was down on Wednesday after having lost approximately half its gains made following a rare joint action by the U.S. The reason for the move was not immediately apparent. The yen had fallen to a record low of 163.98 yen per dollar before the intervention. It then rose as high as 155.21, before reversing some of its gains. The yen last rose 0.92% to 158.72 dollars per yen on Wednesday. Chris Scicluna is the head of economics research at Daiwa Capital Markets. He said: "It would be convenient for 'the U.S., or Japan to at least conduct a monetary rate check after Bank of Japan's comments this morning." Hajime Takata, a hawkish member of the BOJ Board, said that on Wednesday the central bank needed to act quickly to combat inflationary pressures. He suggested that they should not follow a semi-annual schedule set by the markets. It is difficult to determine what is driving the dollar/yen move, but I suspect that it is more of a rate-check than an intervention to shift the trend as the recent intervention failed to do so," said?Scicluna. BOJ Governor Kazuo Ueda also indicated on Tuesday that a significant chance exists of an increase?this month. Treasury Department reported that Ueda and U.S. Treasury Sec. Scott?Bessent had a discussion in which he expressed strong support for "decisive monetary" steps to combat the yen's weakness.
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Sources say that OPEC+ is likely to maintain its oil production policy on Sunday.
Three sources 'close to the issue' told us that OPEC+ will likely keep its oil production?policy for October unchanged at a meeting this Sunday. The producer group has completed the unwinding one layer of cuts in production and is now focusing on 2027 quota negotiation. The Iran War continues to disrupt oil exports via the Strait of Hormuz. This reduces OPEC+’s influence on prices and market share. The group's decisions on supply now have less impact on the market than in the past. The meeting on Sunday will include seven core OPEC+ countries: Saudi Arabia (and Russia), Kuwait, Algeria and Kazakhstan. Since the beginning of this year, these countries have been increasing their monthly production quotas. Two of the sources have said that their online meeting will begin at 1100 GMT. The actual production has fallen short of the planned increases in quotas due to the disruptions caused by the wars in Iran, Ukraine and the Gulf. OPEC+ is made up of the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia. OPEC and its main producer Saudi Arabia did not respond immediately to comments. This month's increase, agreed in early August, completed a phased rollback of a 1.65 million-barrel-per-day supply cut first agreed in 2023, when the ?group still included the United Arab Emirates, which left OPEC in May. OPEC+ has another layer of cuts in production that will cover most of the?21 country group until 2026. The group is also reviewing member's oil production capacity to establish baselines for 2027, which will form the basis of quotas. One of the sources stated that DeGolyer and MacNaughton in Texas, who is conducting the review of most members, will?submit their report to OPEC by the end of September. This could lead to difficult negotiations, before the group establishes new production benchmarks at its end-of-year meeting. Iraq and other?members have called for?higher production quotas. The UAE left OPEC partly because they felt their quota didn't reflect their growing production capacity. Bloomberg News reported that Venezuela was also considering leaving OPEC.
FOREX-Yen surges sharply; dollar falls from two-week-high
The Japanese yen rose sharply on Wednesday against the U.S. Dollar after retracing approximately half of the gains made at the end July following a rare, joint intervention between the U.S.
The motive for the intervention was not immediately apparent. The yen had fallen to a 40-year-low of 163.98 per dollar prior to the intervention. It rose as high as 155.21, before giving up some of its gains. The yen last rose 0.79% to 158.92 dollars.
Chris Scicluna is the head of Daiwa Capital Markets Europe's economic research. He said: "It would be convenient for the U.S. to conduct a rate review, following the Bank of Japan remarks this morning."
Hajime Takata, a hawkish member of the BOJ Board, said that on Wednesday, the central bank needed to act quickly to combat rising inflationary pressures rather than follow a semiannual rate increase schedule.
Scicluna stated that it was difficult to determine what caused the dollar/yen to move. "I suspect this is likely to be more of a rate-check than an intervention to try to shift the trend, as the recent interventions did not achieve that."
A rate check is when a central bank or government asks financial institutions for an exchange rate, but doesn't buy or sell.
BOJ Governor Kazuo Ueda also indicated on Tuesday that a hike is likely to occur this month. Treasury Department reported that U.S. Treasury Sec. Scott Bessent expressed a strong support for "decisive monetary measures" to combat the yen's weakness during a meeting between Ueda and Bessent.
Analysts say that although some factors suggest the possibility of an intervention on Wednesday, the size of this move was relatively small.
"If it is an intervention, then they tend to occur when the markets are thin. Right?" This week would be a thin one, so it's possible to check that box," said Hank Calenti.
Takafumi Oonodera, First Vice President at Mitsubishi UFJ Trust and Banking Corporation, stated that the yen gains are below what one might expect from an official action.
Onodera stated that the magnitude of this move did not indicate direct market intervention.
The wide difference between U.S. interest rates and Japanese rates has caused the yen to struggle to find support. On Wednesday, it traded back down to 160.39, its lowest level since the intervention.
The drift above 160 indicates that the markets do not really see any fundamental support for the yen right now, said Eric Theoret. Currency strategist at Scotiabank.
OIL RAISES INFLATION FEAR
The dollar had been boosted earlier in the day by a spike in oil and a rise of?benchmark 10-year Treasury Yields to three-year highs.
The dollar index (which measures the greenback versus a basket including the yen, the euro and other currencies) fell by 0.09%, to 99.59. Meanwhile, the euro was down by 0.06%, at $1.1585.
The dollar fell 0.23%, to $1.3484.
Brent crude prices increased 1% during a volatile session. This was due to renewed military strikes by the U.S. against Iran, which have limited world oil supplies.
Theoret said that the markets are clearly worried by recent developments between Iran and the U.S.
Iranians and Arab neighbours fear a return to war after the largest exchange of fire between Tehran, Washington and the southern coast of Iran. U.S. forces struck the Iranian coastline and Iran fired at American bases throughout the region.
There is growing concern that rising oil prices may lead to higher consumer price inflation, which is already above target. This could increase the likelihood of Federal Reserve interest rates being raised.
Kevin Warsh, the Fed chairman's hawkish remarks on Friday, prompted traders to increase their bets that the U.S. Central Bank will raise rates at its meeting September 15-16.
Fed funds futures traders now price in a 63% chance of a hike for September, up from just 35% prior to Warsh's remarks.
The Canadian dollar rose after the Bank of Canada held its key policy rate at 2.25% as expected on Wednesday. However, the bank warned that inflation risks had increased, and the growth prospects were more uncertain due to new U.S. Tariffs.
The Canadian dollar was up by 0.42% last at C$1.384.
The New Zealand dollar fell after the central bank of the country raised interest rates on Wednesday for the second time in a row and indicated that more tightening would follow. However, it stressed that any future moves will be measured because the bank warned about mounting risks to economic outlook.
The Kiwi fell 0.78%, to $0.5845.
(source: Reuters)