In today’s briefing:
- US Treasuries: The Battle for Price Discovery Versus Financial Repression
- Base Oils and Lubricants: Weekly Global Market Review – 4 Sept ’26
- Activity Defies Dovish Biases
- Back to School
- Ags did something they did last time in 2009
- CX Daily: China’s Transport Price War Shows What Happens When Trains Catch Up to Planes
- Morning Market Notes: A New Phase of Naval Conflict?
US Treasuries: The Battle for Price Discovery Versus Financial Repression
- The premium that bond investors are willing to pay for US Treasury securities has fallen since the end of the COVID-19 pandemic due to concerns about monetary and fiscal policy.
- Quantitative easing (QE) by the Fed and below-target inflation persuaded US politicians not to end profligate fiscal policy conduct. QE has sobering legacy issues involving rising inflation and government debt.
- Bond investors and US policymakers disagree about the pricing of Treasury securities as bad fiscal policy conduct is being increasingly factored into valuations as investors seek appropriate price discovery.
Base Oils and Lubricants: Weekly Global Market Review – 4 Sept ’26
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Middle East disruption is drawing more Asian base oils toward the Americas, reducing the surplus normally available in Asia just as seasonal demand starts to recover
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Middle East disruption is leaving the US short of the Group III volumes it normally receives, tightening its balance at a time when summer surplus would otherwise move to export markets.
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Wide US arbitrage is drawing more Asian base oils toward the Americas, adding to established Group III flows.
Activity Defies Dovish Biases
- Upwardly revised headline EA GDP in Q2 didn’t stop it from underperforming peers in H1, including in the labour market, but global activity has been remarkably resilient.
- There is broad balance in countries reporting higher unemployment rates as lower, which suggests slack and monetary conditions are both broadly neutral now.
- Dovish BoE assumptions leave it accommodating high inflation and credit growth, while the decisive ECB stopped the drift. One BoE hike is not enough, but is all that is likely.
Back to School
- The US labour day holiday traditionally marks the end of the summer break for markets, especially in the US, which means not only a pick up in liquidity but also something of a shift to a slightly longer term mindset – the summer having been dominated by a lot of short term trading noise, particularly around AI.
- At the macro level, July had been a relatively stable month for equity markets, but beneath the surface there had been an enormous amount of volatility, particularly in tech stocks, much of it associated with the market mechanics of distressed selling from margin calls and forced buying from short covering.
- There was however another important factor (which we discussed here in Were Style Lags part of the July washout?), which was that passive indexation, once again, triggered some powerful rotations within markets.
Ags did something they did last time in 2009
- On my socials the chart claiming El Nino leads world food prices by 12 months is making the rounds again, but the correlation behind it is actually weak (just +0.13, barely significant and explaining under 2% of the variation)
- That doesn’t change our view that we still expect upward pressure on ag commodity prices this cycle, based not on one macro chart but on the mechanism-specific signals we’ve tested individually…
- Cocoa’s ONI momentum signal, Corn Belt heat, the live Texas-Xinjiang cotton stress, and an Indian monsoon tracking the textbook strong-El-Nino pattern.
CX Daily: China’s Transport Price War Shows What Happens When Trains Catch Up to Planes
- In Depth: China’s Transport Price War Shows What Happens When Trains Catch Up to Planes When confronted with the choice of flying or taking the train across China, a growing chorus of travelers is defaulting to a single answer: “whichever is cheaper.”
- This encapsulates a profound shift underway in China’s transportation market.
- Analysis: Why China Is Rewriting Its Stock Market Refinancing Rules
Morning Market Notes: A New Phase of Naval Conflict?
- Given the latest round of “naval warfare” between the U.S. and Iran, we were somewhat surprised that the market response has not yet been more “robust.”
- With Iran’s apparent willingness to be the aggressor in response to Operation Economic Outcast, however, it is extremely difficult to trust this market.
- Nonetheless, despite our belief that the conflict will continue through year end, at the risk of famous last words, we believe that the upside to oil prices will be limited.
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