Global rates kept grinding higher as inflation concerns and heavy issuance pushed curves wider. Japan set the tone, with 10-year JGBs touching 3.00% for the first time since 1996, while US 10s held around 4.78% and 2s near 4.35%; in Europe, Bunds were cited at 3.35%, OATs at 4.21% and gilts at 5.23%. FX tracked the yield move, with USD/JPY about 159.9 and EUR/USD around 1.160–1.161. Risk assets were mixed: Nikkei -0.2%, KOSPI +0.2%, Hang Seng about -0.9%, and US futures were near flat, even as Brent rose about 0.7% to $91.1 and WTI added about 0.8% to $86.5; gold fell 0.4% to roughly $4,431, while BTC rose about 1.3% to $78.7K and ETH gained about 2.3% to $2.47K.
Geopolitics centred on the Strait of Hormuz, where reports pointed to tankers being hit despite a southern corridor; Kpler logged five commodity transits on Monday versus a 10-day average near 14, and none were liquid tankers, against a stated goal of about 50 ships a night by mid-September. In Europe, equities were pressured by rates, with FTSE -1.16% at 10,699.05, DAX -1.22% at 25,960.39 and CAC -0.41% at 8,300.69, while STOXX 600 was about flat and energy up about 1.4%. Macro data showed euro zone manufacturing PMI at 52.7, Germany at 54.3 and France at 51.1; retail sales in Germany fell 3.4% m/m and 2.5% y/y, and the euro zone CPI estimate was 3.3% y/y with core at 2.4%, alongside unemployment at 6.4%. Corporate and sector drivers included Novartis +5.5%, Air Liquide +3.5%, Partners Group -7.0% on H1 attributable profit -13%, and Micron’s Taiwan unions representing nearly 10,000 of roughly 15,000 workers, with over 80% backing possible strike action; in AI infrastructure, Anthropic’s $35B Lambda contract followed a prior structure with a 15-year commitment worth $19.6B that could rise to roughly $50B, while Anthropic’s new compute commitments were put at around $80B in a week, and Zhipu cited 60T+ tokens in six days on roughly 100,000 domestic accelerators, with cost per token down about 80% YTD and performance up about 3x, alongside ARR of $1.6B end-August, annualising above $2B on the latest week.
Global Markets And Policy Shifts
We are witnessing a structural shift in global fixed income, highlighted by Japan’s 10-year yield touching 3.0% for the first time since 1996 and U.S. 10-year Treasuries holding near 4.78%. In the coming weeks, we should position for sustained upward pressure on global yields by shorting sovereign bond futures or buying payer swaptions to hedge against higher terminal rates. With historical data showing that September often triggers long-term trend reversals in fixed income, preparing for a higher-for-longer regime is our most urgent priority.
The Japanese Yen is primed for a major move following strong hints of policy action at the G20, especially with USD/JPY hovering around the critical 160 level. We recommend buying out-of-the-money put options on USD/JPY to capture a potential sharp appreciation of the Yen as the Bank of Japan normalizes its monetary policy. Historical precedents like the 1985 Plaza Accord remind us that September is a classic window for major currency regime shifts, and current positioning suggests a massive squeeze on short-Yen trades is coming.
Energy Markets, Supply Chains, And Defensive Strategies
Escalating tensions in the Strait of Hormuz have choked commodity transits down to just five ships a day compared to the recent average of fourteen, sending Brent crude past $91 a barrel. We should utilize long call options on Brent and WTI to capitalize on this supply-side shock, as clearing the shipping lanes is proving much harder than expected. Furthermore, elevated European gas prices and low storage levels mean we must brace for a prolonged energy-driven inflation spike by trading inflation-linked swaps.
The looming strike threat at Micron’s Taiwan facilities, which control critical high-bandwidth memory capacity, is set to inject severe volatility into the semiconductor sector just before late-September earnings. We should buy short-dated straddles or index puts on tech benchmarks to protect against these supply chain disruptions, especially given the increasingly complex financing structures underpinning major AI hardware leases. With tech valuations highly sensitive to both rising discount rates and hardware bottlenecks, protecting our equity exposure with volatility-based derivatives is a crucial defensive move.
