London | Brisbane. 12 October 2026.
Bond markets look to go higher and yields drop this week as all the bad news is priced in, and some good news begins to surface.
Firstly the 10 and 30 year US government bond auctions went really well, with very low primary dealer participation. At 25 year highs of 5.32% and 5.618%.
Secondly, Trump’s much publicised deal with Russia to buy diesel for the world had the veneer of good news but in reality only represented 1 day of global consumption. So it’s just a gimmick to help in the US midterm elections. Just imagine what European leaders are thinking about this betrayal. And what are Ukrainians thinking?
Thirdly the FED’s minutes for the September meeting were released. Members of the committee were unanimous in raising rates 25bps and expect another rate hike this year. However the commentary was not as hawkish as markets had priced in so this was, at the very least, better than expected.
In all, a much deserved break in the bearish narrative. Remember we published our press release on 17 August entitled “Are Yields About To Blow Up?“. Since then the US 10 year yield is up 65bps. Remarkably the S&P is unchanged and the NASDAQ is actually higher.
After 7 weeks of relentless selling in global bond markets, a good old-fashioned short squeeze is on the cards so look for bonds, stocks, bitcoin and even gold to rally.
The good news above is a pleasant relief but the squeeze won’t last long. US CPI & PPI are released on Wednesday and Thursday, so we may get a very short rally, possibly extended for a few weeks if those numbers are benign. The euphoria won’t last long though.