AFS Markets Blog: Morning 29/09/2026

• Meanwhile in markets, bond yields continue to push to new highs as Brent crude's stumble below the $100 per barrel mark last week proved short-lived. At 5.25 percent, the 10-year yield is now within touching distance of its 2007 highs;

• US Treasury yields are up 2bps across the curve this morning. The 2-year UST yield is now 5bps below the psychological 5.00 percent mark – which it last traded above in 2024. Yields are following energy prices higher this morning, with Brent crude trading at $107.67 at pixel time. Brent is up nearly two percent from yesterday’s close, as pessimism over the potential of a US–Iran deal ahead of the midterms outweighs news that the key Saudi East-West pipeline has resumed operations (albeit at half capacity);

• Rising bond yields are not merely a function of energy shocks and inflation though. Real yields from the US to Germany are sitting at multi-year highs: the 10-year real Bund yield stands at 1.34 percent – up over 60bps since the conflict in Iran began – while the 10-year real UST yield is at 2.78 percent – up roughly 125bps since late February. While multiple factors are at play, we view the structural deficits of Western governments as the main culprit;

• While on the topic of fiscal sinning, the French OAT-Bund spread obviously warrants some close attention. The 10-year spread closed yesterday at 113bps, marking a new post-Eurozone crisis high;

• Earlier this morning, the Reserve Bank of Australia raised its cash rate target by 25bps – marking its fourth hike in the past twelve months. The decision pushes interest rates Down Under to a 15-year high – yes that means they now exceed peak pandemic levels. According to RBA Governor Michele Bullock, inflation continues to be driven primarily by domestic capacity pressures – though the situation in the Middle East is certainly compounding the problem. Headline inflation has now been above the RBA’s 2-3 percent target for over a year, long before the war in Iran even started;

• Highlighting the uncertainty ahead, Governor Bullock said "Will four hikes be enough to slow inflation? I don't know". Punters clearly don’t think the RBA is done after this hike. Cash rate futures are now nearly pricing in two additional 25bps hikes by the RBA over the next twelve months;

• Nevertheless, the hawkish interpretation of the 9–0 vote was tempered during Governor Bullock's presser. AUDUSD fell below the 0.70 mark for the first time in two months after Bullock revealed that a rate pause was under consideration at this meeting;

• Shifting to other FX crosses, EURCHF is trading near 0.946, approaching its September highs. The pair has gained nearly one percent since last week’s Swiss National Bank decision, where the SNB’s governing board signaled little appetite for hiking interest rates. Meanwhile, USDJPY remains stuck in the 157 handle despite continued jawboning from Japanese officials;

• Touching on some broader market commentary, Asian equities are largely in the red this morning with the Nikkei and Kospi indices losing over a percent. S&P 500 futures are only down marginally this morning;

• Looking ahead, the main event this afternoon is the release of the US detailed job openings report for August, which is expected to signal a steady labor market. Besides that, we have a selection of ECB- and Fed-speakers to keep us entertained.

‍