GGMA Markets Briefing: The Bond Vigilantes Set the Tone as the Ceasefire Lapses and Yields Break Higher Everywhere
Monday's US close set the stage: the S&P 500 slipped 0.22% as the 30-year Treasury yield reached its highest since 2007, and the overnight session turned that grind into the day's story (BBG). The US-Iran ceasefire expired without extension, a tanker was struck in the Strait of Hormuz, and the long end of every major bond market sold off at once, with the market now asking whether the vigilantes force the issue before Wednesday's Fed minutes and 20-year auction (Reuters).
Asian equities erased early gains and fell hard. The Nikkei dropped 2.32% to 67,680, the sharpest fall in the region, and MSCI's emerging-market index lost 1.28% to 1,698 (BBG). Korean shares gave up an early advance of more than three per cent to close lower, a reversal the wrap desk read as the AI trade meeting valuation gravity in thin liquidity (BBG). The CSI 300 fell 0.76% to 4,688 after Monday's across-the-board July data miss left Premier Li Qiang urging officials toward incremental measures, with economists reading Beijing as accelerating existing policy rather than adding stimulus (BBG). US futures followed, the S&P 500 contract down 0.40% at 7,738 and the Nasdaq down 0.75% at 29,871, while the Euro Stoxx 50 fell 0.50% to 6,522 (BBG).
The bond market is the main event. The US ten-year yield rose 2.0bp to 4.74%, and the 30-year added 2.0bp to 5.33%, its highest since June 2007, with the two-year at 4.19% (BBG). The selloff is global and structural: French borrowing costs are at their highest since 2008 with traders building shorts into the autumn budget fight (BBG), German yields trade at 2011 levels, gilts are approaching 6%, and Japan's ten-year touched its highest since September 1996 before settling at 2.94%, up 2.1bp (Reuters). Three durable forces underpin the price action. Record corporate supply is one, with August investment-grade issuance already at a monthly record (BBG) and AI-linked borrowing equal to roughly a quarter of the Treasury's net coupon issuance competing directly with governments for duration capital (BBG). The buyer base has shifted from price-insensitive official holders toward return-sensitive private money, a change one strategist tallies at about 90bp of 30-year term premium (BBG). And foreign official demand is softening at the margin, with overseas Treasury holdings down for a third month in four, led by Japan's intervention-linked drawdown (BBG). Yardeni Research is not pushing the panic button but is watching whether the vigilantes do, framing 4% to 5% as the ten-year's normal range (BBG), while Citadel Securities argues the long end is charging a credibility premium for policymakers who take the easier route (BBG). Notably, one Japanese bright spot: the five-year JGB auction drew its strongest demand in over a year as money crowds into the belly, though Thursday's 20-year sale is the harder test (BBG).
Oil pushed the other way against the risk tone. WTI rose 0.7% to 85.07 and Brent 0.5% to 91.28 as the ceasefire lapsed, Washington ruled out an extension, and Tehran told Reuters it will shift to a fully offensive posture, setting a few-weeks deadline for American compliance with the June memorandum as its precondition for talks (Reuters). A cargo vessel was struck by a projectile in the strait with engine-room damage and a crew casualty. Only three vessels transited on Sunday, and the analyst consensus has pushed de-escalation to year-end with a limited traffic-recovery deal as the base case (CNBC). The one diplomatic glimmer is a reported back channel to the Revolutionary Guard, which the American side confirmed in broad terms (Reuters). Copper broke the other direction, down 0.6%, as the first exchange-inventory build in two months and swelling Shanghai stocks suggested the squeeze may be cresting into Wednesday's contract expiry (BBG). Gold eased 0.56% to 4,391 as the firmer dollar and rising real yields outweighed the war backdrop (BBG).
Currently, STIR traders price nine basis points of tightening for the September Fed meeting, a 36% probability of a rate rise, and 24 basis points cumulatively by December. That is a hawkish shift from Monday, the oil rally doing the work, and it collides with a San Francisco Fed letter arguing policy is currently accommodative against a medium-run natural rate near 1.5% (Frbsf). For the ECB, STIR traders price 24 basis points of tightening for the September meeting, a 94% probability of a rate rise, and 42 basis points cumulatively by December. For the BoJ, they price 19 basis points for the September meeting, a 76% probability of a rate rise, and 38 basis points cumulatively by December, with one house now expecting a quarter-point move every three to four months (Reuters). For the RBNZ, they price 23 basis points for the September meeting, a 91% probability of a rate rise. Wednesday's July minutes will detail the three hike dissents; the SF Fed letter gives hawks an analytical frame (Frbsf).
In currencies, the dollar steadied after Monday's May lows, with the index at 99.64, the euro at 1.1569, and sterling at 1.3527 (BBG). The yen slipped 0.14% to 159.69 per dollar even as JGB yields climbed toward the levels that invited July's joint intervention (Reuters). The kiwi lagged at 0.5876, down 0.44%, pressured by the China backdrop and the weakest domestic population growth in over a decade outside the border closure (BBG). India's central bank has pinned the rupee near its record with dollar sales in every session for over a week, collapsing realised volatility in a throwback to its managed-range era (Business Standard).
In corporate news, Nvidia agreed to backstop the first phase of OpenAI's Ohio data-centre campus with up to 105 billion dollars over twenty years, denying the arrangement is circular financing (BBG). BHP's profit rose by almost a third with copper revenue overtaking iron ore for the first time (BBG). Berkshire Hathaway added to Delta and Alphabet as Greg Abel deploys the cash pile (BBG). China ordered some state agencies to strip a government build of Windows ahead of schedule (BBG), nine departments unveiled county-level consumption measures (Xinhua), and Bloomberg's explainer laid out why cut-price Chinese open-weight models threaten the premium pricing beneath the American AI trade (BBG).
Data and the day ahead: the UK labour report split down the middle. Wage growth beat, with total pay at 4.1% against 4.0% expected and the prior revised higher, ex-bonus pay at 3.5% against 3.4%, and the Bank of England's own gauge of private regular pay landing exactly on its 2.8% forecast, while the jobs side softened, unemployment holding at 4.9% against the 4.8% consensus, payrolls falling 13k against roughly flat expected and employment growth of 84k missing the 130k consensus (LS). Sterling barely moved on the release as the two halves offset, leaving tomorrow's UK CPI to break the tie. Earlier, Australia's Westpac consumer sentiment jumped 6.0% in August to 88.9 from 83.9, still deep in pessimistic territory (LS), and New Zealand's population grew 0.7% in the year through June, the weakest outside the border closure since 2013 (BBG). Still to come: the German ZEW at 11:00 CET, Lane in Dublin at 13:45 CET, then the US afternoon with housing starts and import prices at 14:30 CET, industrial production at 15:15 CET and pending home sales at 16:00 CET, ahead of Wednesday's Fed minutes and 20-year auction. The full preview is in today's Event Data Preview; the Hormuz tape remains the session's wild card (Reuters).
Time Stamp: 18 August 2026, 08:48 CET