AFS Markets Blog: Morning 21/09/2026

• Meanwhile in markets, US Treasury yields are down 1–3 bps in a bull-flattening move this morning. As a result, the 10-year yield has been pushed back below the key 5.00 percent psychological threshold;

• In our neck of the woods, Bund yields are 4bps lower across the curve. Spreads over Bunds have tightened by 1–2 bps across the periphery this morning. The closely watched French OAT-Bund spread remains above the century mark at 102bps, though it has pulled back from Friday’s post-Eurozone crisis high of 105 bps. Elsewhere, the Italian BTP-Bund spread stands at 89 bps – off its highest level since May – while Spanish and Portuguese spreads have eased off their July highs;

• Over the weekend, Germany held its latest round of regional elections and the results were disastrous if your name is Friedrich Merz – the Chancellor of Germany. In Mecklenburg-Western Pomerania the far-right AfD secured a victory – though without an outright majority as the SPD followed closely behind. Merz's CDU, however, failed to reach the 5 percent threshold needed to secure a seat, meaning the party will not be represented in the state parliament at all. Furthermore, in Berlin the governing CDU was defeated by the far-left Die Linke party – and in all likelihood won’t be part of the city’s next coalition. Friedrich Merz was already facing intense internal pressure, and these latest defeats will only ramp up calls from within his party for him to step aside;

• Shifting to broader market commentary, energy prices are heading lower this morning. Brent crude has shed two percent, trading at $101 per barrel, while European natural gas prices have seen a similar two percent decline, slipping to €77 per MWh. Asian equities are in the green this morning, as S&P 500 futures sit on half a percent gains. Over in FX, the broad dollar is up marginally this morning. USDJPY is trading at 157 – recovering slightly from Friday’s post-rate check lows;

• Not much to look ahead to today, besides a single ECB- and Fed-speaker. Tomorrow brings a busier central-bank speaking slate, with three speakers apiece from the ECB and Fed. The UN General Assembly also kicks off, so we’re keeping an eye out for some geopolitical headlines – specifically President Trump’s meeting with Gulf leaders which will reportedly focus on the next steps in the war with Iran.

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