AFS Markets Blog: Midday 14/09/2026

• Meanwhile in markets, bonds continue to take a beating as energy prices refuse to stop moving higher. Especially the relentless record-breaking of European natural gas prices is weighing heavily on Bunds;

• European natural gas prices have surged 35 percent over the past month, dwarfing the sub-20 percent gain in Brent crude. The trend is even starker year-to-date: while Brent is up just under 80 percent, European gas has surged over 200 percent;

• Energy pressures have seen the 2-year Bund yield advance another 5bps this morning to reach 3.25 percent – its highest level since 2023. That puts its post-pandemic peak of 3.37 percent within striking distance, after a 112bps year-to-date surge. Across the Atlantic, the 2-year Treasury yield is holding at 4.63 percent, which essentially marks its highest level since 2024. Nevertheless, its post-pandemic peak of 5.26 percent remains further out of reach;

• The past week has not just delivered massive shifts in fixed income, interest rate derivatives have felt the pinch too. In our neck of the woods, the peak pricing for ESTR forwards has jumped from 3.00 percent just a week ago to 3.31 percent, as punters price in three 25bps hikes over the coming year. Across the Atlantic, US OIS forwards have seen an equally dramatic repricing. The peak has surged to 4.55 percent – up from 4.23 percent a week ago – with pricing increasingly leaning toward four 25bps hikes over the next twelve months. A development sure to draw the ire of President Trump. Looking ahead to Wednesday's FOMC meeting, fed funds futures are pricing in 23.5bps – essentially fully pricing in a hike after last week’s disappointing CPI print;

• Shifting to equities, the Stoxx 50 is down nearly a percent this morning, while S&P 500 futures have dropped three-quarters of a percent. Although pressure from rising energy prices is certainly weighing on the broader market, the steepest losses today are concentrated in the AI trade;

• The weakness in AI follows news over the weekend that leaders from major AI labs – including Anthropic, OpenAI and xAI – have called for a slowdown in the development of their newest models to prioritize safety. South Korea’s KOSPI index is down three percent this morning, with memory chip giant SK Hynix falling seven percent. Conversely, our European AI losers index – which tracks software and publishing firms whose services are at risk of being automated by AI – is reacting positively to the proposed pause, gaining two percent today;

• Touching on some broader market commentary, EURUSD is down half a percent this morning, finding resistance at its 50-DMA. USDJPY is trading at 154.54 at pixel time, its highest level in a week. In fixed income, the French 10y OAT-Bund spread hit 97bps this morning, a new post-Eurozone-crisis high. Over in commodities, gold is trading at $4,285 a troy ounce – having fallen two percent over the past week – while copper futures have fallen over six percent from their highs last week;

• Looking ahead, the calendar is empty today. With only a few ECB speakers scheduled for tomorrow, we’ll have to wait until Wednesday’s FOMC meeting for some real action.

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