AFS Markets Blog: Morning 02/11/2026

• Meanwhile in markets, we’ve started the week on a quiet note, with punters perhaps keeping their powder dry for the US midterm elections tomorrow and US payrolls on Friday. There’s some movement, namely crude oil futures prices plunging. But surprisingly, that hasn’t lifted US Treasuries;
• Brent futures are down more than 6% at 110 a barrel, the lowest level since mid-October. Dutch natural gas futures are down a more measured 2% at 101.5 euros per MWh. For the record crude oil shipments out of the Gulf have mostly normalized, but exports of refined products and LNG are still low relatively to pre-war levels. Plus, the cost of shipping remains high, given (near) daily Iranian strikes on commercial shipping;
• Energy futures prices are lower on the back of an over the weekend Axios report (Axios, of course) that President Trump is giving diplomacy with Tehran another chance. Remember that a week ago Vice President Vance sent a letter to Iran’s security chief Mohsen Rezaei last week. Rezaei said that the tone of the letter had changed completely in a positive way. But Tehran has yet to respond to the high-level direct US outreach;
• About that Axios report, according to the sources Trump had a “frank”, “tough” and “direct” call with Israel’s Prime Minister Netanyahu about peace talks and a possible resumption of air strikes. Read that as no lost love between the two. Predictably, Netanyahu is pressing Trump to resume strikes ASAP. Trump, on the other hand, says that he’s in no hurry. In this regard, it’s worth pointing out that the President has made peace with the GOP losing control of Congress. Admitting the inevitably of defeat as per the polls and prediction markets, in an interview this weekend he said he would be “Mr. Veto” if the Democrats take full control of Congress;
• For what it’s worth, former Trump ally and talk show host Tucker Carlson said that Trump, under pressure from Netanyahu, may launch a nuclear strike on Iran’s nuclear site. I wouldn’t take Carlson’s warning literally though. I believe – ever the optimist – that Carlson, by crying wolf about dropping nukes, hopes to whip up as much pressure on Trump as possible. To prevent him going deeper into the quagmire with more air conventional strikes. Which, if past precedent is any guide, won’t achieve much;
• Elsewhere in markets, UST yields are bog steady, with the 2y at 4.58, the 10y at 4.91, and the 30y at 5.30 – all trading at their lowest level since late September. Asian equities are mixed, with the Nikkei down 0.3% but Chinese markets up moderately. The AI-heavy Kospi is up two percent, but the AI sentiment remains fragile. AI bonds may not have such a good day after the FT reported that Antropic will likely not get an Investment Grade rating. Though that should be no surprise. In other AI news (also reported by the FT), OpenAI is forced to cut its latest funding round by $10 billion to $20 billion at a $1.25 trillion valuation, down from a valuation of 1.4 trillion before;
• Bund futures have opened flat, as have OAT futures. Today, Belgium, not France should be in the crosshairs. Belgium, the Euro Area’s less well-known fiscal problem child, likely won’t have a budget anytime soon. Failure to reach a budget deal forced Prime Minister De Wever to tender his resignation this morning. For the record, IMF forecasts put Belgium’s headline deficit this year at 5.3%, bang in line with that of France;
• In FX the dollar has started the week flat too. In the greater scheme of things, the broad dollar is half a percent below the October high, with the deflating AI boom/bubble likely responsible for recent weakness. The euro this morning has eked out the smallest of gains versus the greenback and the Swiss franc, the stress barometer for the Eurozone’s fiscal turmoil in France;
• Looking ahead, we have plenty of ECB-speakers plus the US ISM manufacturing PMI on tap. Regarding the former, post-meeting ECB speak has a hawkish bent, with even a leading dove flagging multiple hikes down the line, though likely still at a quarterly pace. The US ISM PMI should read stable at 54.7. In the greater scheme of things, the US economy will likely post GDP growth north of 3% this year. Or at least domestic demand growth exceeding 3%. Headline growth could be lower on surging imports;
• At the US midterms tomorrow all House seats and no less than 35 Senate seats are in play, as are a large number of governorships. As mentioned before, the Republicans will likely get trounced. On Wednesday the Riksbank is expected to raise rates by a quarter to 2.00%. On Thursday the Bank of England is expected to raise rates by the same increment to 4.00% while the Norges Bank should hold rates at 4.5%. Friday’s US nonfarm payrolls should print reasonably solid at 55k.