Rising Short-Term Rates Trigger Bond Sell‑off Amid Iran War
What drove the bond sell-off? Front-end interest rates are up sharply everywhere (blue), but long-term yields were - until this week - unresponsive (red). This disconnect was unsustainable and - as war with Iran drags on - markets capitulated this week... https://t.co/2CCL4GYLBv https://t.co/XN7bUzHQwj
Global 10y10y Forward Yields Surge Amid Bond Sell‑off
We've officially reached the "brutal" stage in the global bond market sell-off. The 10y10y forward yield (red) is making new highs all over the place. Japan's 10y10y forward has risen 30 basis points in just a few days. Even Swiss...
Bond Yields Surge, Signaling End of Reckless Fiscal Policy
Long-term gov't bond yields made new highs for the UK (orange), the US (black), Japan (red) and France (green) this past week. I've banged on for a year how markets' attitude to debt has fundamentally changed. The days of reckless...
Long‑term Yields Finally Correct Unsustainable Oil‑spike Pricing
This week's global spike in long-term yields is about an unwind of something that was unsustainable. When oil prices spiked months ago, money market curves (blue) priced central bank hikes, but long-term yields (red) didn't rise. That's now correcting... https://t.co/wLyQataCjN https://t.co/IUcD0KAzNo
10-Year Forward Yields Hit Record, Signaling Global Debt Crisis
It's been my view for some time that we're in a global debt crisis, with markets losing confidence that gov'ts will ever fix fiscal policy to bring down debt. Today's a good reminder this is going on. 10y10y forward yield...
10y10y Yield Tops 2022, Signaling
The US' 10y10y forward Treasury yield (red) has just gone above its highest level in 2022, when we were dealing with massive global supply disruptions due to the COVID recovery. We're in a global debt overhang and the bill is...
Low‑Inflation Era Ends; Global Debt Pressures Rise
For the decade before COVID, we were all convinced inflation would always be low and so interest rates would always be low too. That's over. I talked about the global debt overhang and how the UK isn't an outlier in...
US Oil Boom Caps World Prices, Hikes US Gasoline
The emergence of the US as a major oil producer - and exporter - is an equilibrating force in the global shortfall. Good news is that this helps cap global oil prices. Bad news is there's less oil for domestic...
Europe’s Center Crumbles; UK Embraces Free‑Rising Yields
The UK isn't an outlier. The implosion of the political center is happening across Europe. The fact that fiscal space is exhausted is also true for many countries. What the UK gets right is to let yields rise freely. Only...
Geopolitical Turmoil and Political Instability Drive Global Yield Surge
The rise in long-term gov't bond yields isn't about any one thing. There's unstable global geopolitics, with Iran the latest symptom. There's the collapse in politics as usual, with the UK in focus. All this pushes up 10y10y forward yields...
US Surplus Driven by Rising Refined Product Exports
The US imports crude (blue) and exports refined product (red), which is things like gasoline, heating oil and jet fuel. The sharp rise in the US' oil surplus is all about more refined product leaving the country, which helps mitigate...
U.S. Oil Export Boom Turns Dollar Oily
The Dollar used to have a negative correlation with oil prices, but that was when the US was a net importer. About 5 years ago, the US transformed into a net exporter and so now higher oil prices lift the...
Iran Blockade Lowers Oil Prices, Confirming Original Prediction
When I first started pushing for an Iran blockade, my main point was that the big rise in oil prices already priced the incremental disruption to supply, so the pros outweighed the cons. That's been borne out. Oil prices are...
Italy's Cash Deficit Stays Double Accruals, Exposing Eurozone Fiscal Flaws
Italy is getting lots of accolades for bringing its accruals deficit (red) back to 3%, but the cash deficit - which is what matters because it drives debt issuance - remains at 6% (black). Fiscal policy in the Euro zone...
White‑collar Automation Threatens New Rust Belt in Cities
There's a lot of white-collar jobs that can be automated away. That's not about AI, but just about repetitive, automatable stuff. We're on the cusp of another "rust belt" shock in the labor market, only now it'll hit cities like...
UK Yields Exceed Italy, Not a Weakness, ECB Cap Effect
The UK's long-term gov't bond yields (lhs) are now far above those of Italy (rhs). This doesn't mean the UK is in worse shape. It's just a reflection of past ECB actions to aggressively cap Italian yields. I talked about...
G10 Long-Term Yields Hit Record Highs Amid Debt Surge
In the UK, long-end yields are at all-time highs, but - if you look across the G10 - that's true for many other countries as well. The US, Japan, France and Australia all have the highest yields in a very...
Strong US Data Yet Dollar Declines, Signaling Regime Shift
I'm doing a live stream at 9 am (ET) this morning. I'll talk about how much the Dollar is falling and how we're seeing mounting signs of regime change, whereby strong US data see the Dollar fall. That's how it...
Brazilian Real Leads EM Gains, Set to Dip Below 4.50
The Brazilian Real is now the best-performing EM currency since the start of the war, leaving aside the Hungarian Forint, which is idiosyncratic and about Orban losing the election. The Real has a lot further to go and - unlike...
Dollar Declines vs EM Despite No Peace Deal
It's remarkable how much the Dollar is falling versus EM (blue), even though we don't even have a peace deal yet. Dollar down is a really high-conviction trade that people are putting on already now because they know they'll get...
Oil Shock to Accelerate Long‑Term Yield Rise
I'm doing my usual live stream tomorrow morning at 9 am (ET). I'll be focusing on all things debt, especially the rise in long-term yields and why the latest shock - the rise in oil prices due to the war...
BoJ JGB Purchases Neutralize FX Intervention, Yen Slides
The Yen is already falling again. Markets know Japan's official FX intervention can't work as long as the BoJ is buying JGBs to cap yields. That JGB buying puts depreciation pressure on the Yen, so intervention just gives markets a...
Turkey's Self‑imposed Dollar Peg Drains FX Reserves
Across all EMs, Turkey has seen by far the biggest drop in official FX reserves. That's an entirely self-inflicted wound and reflects the decision to keep the Lira pegged to the Dollar through a shock where it should obviously have...
Oil Prices May Drop, Debt Burden Continues Rising
At some point, the Strait of Hormuz will reopen and oil prices will fall back to pre-war levels. But the latest rise in long-term yields won't get reversed. Every shock that happens permanently ratchets up global fiscal stress. A one-way...
BoE Embraces Rising Yields, Forces Tough Fiscal Choices
Rising yields are the only way governments will ever make unpopular decisions to bring fiscal policy under control. The Bank of England is alone among the G10 central banks in letting this play out and deserves kudos. The UK will...
Oil Futures Drop Reflect Peace‑Deal Odds, Not Manipulation
Falling futures prices don't mean the paper market is manipulated. All the supply shortfall numbers at this point are well known. Markets are trading the length of the shortfall. Any headline that raises odds of a peace deal naturally pulls...
Brent Spread Returns to Pre‑war Levels, Doom Forecasts Falter
The spread between Dated Brent and the July futures price is back to pre-war levels. The same people who one month ago told us this thing can only go wider are still forecasting the apocalypse. Maybe they're right, but their...
BRL Set to Slip Below 4
The Brazilian Real $/BRL exchange rate during the oil spike in 2022 never quite made it below my 4.50 fair value. But it will during the current oil shock... https://t.co/6FPSc1Z02s https://t.co/jVERTF9raD
Iran's Sole Leverage: Oil Price Spikes, Trump Counters
Thanks to @HolmanJenkins from the @WSJ for including me in this piece. Iran's only weapon in this standoff is to spike oil prices. The Trump administration has done a good job neutralizing this by periodically reminding markets oil prices can...
Oil Price Panic Forecasts Are Scare Tactics, Not Reality
I've been pushing back against apocalyptic oil price forecasts for 2 months now. Of course you can make lots of scary scenarios, but the lesson from 2026 - like in 2022 after the Ukraine invasion - is that those are...
Dollar Poised to Weaken Once War Ends
Regardless of whether the latest headlines are true or not, they're a natural experiment for how the Dollar will trade when the war ends. The Dollar is back down to near its pre-war lows against EM. As soon as war...
Peace Deal Would Boost US Iran Oil Blockade
If we end up with a peace agreement - a big if at this stage - that'll count as a big win for the US blockade of Iran. Since Russia invaded Ukraine, the key question for the West has been...
Staggering EM Reserve Losses Expose Policy Failures
The scale of EM reserve losses during this shock is staggering. More than anything, that tells you about policy dysfunction in certain EMs. Turkey kept its peg to USD, so it had no choice but to intervene a ton. Pakistan...
Iran’s Existential Threat Fuels Erratic Response to US Strait Push
What's happening in the Strait of Hormuz this week is very significant. Iran is blockaded, while at the same time the US is trying to open up the Strait to Western ships. All this is an existential threat to Iran...
US Blockade Works, Opponents Serve Oil Lobby
There's a lot of animosity towards the US blockade, like in 2022 when many of the same people opposed the G7 cap on Russia. This stuff is just lobbying on behalf of the global oil industry. The blockade is working....
US Blockade Cuts Iranian Rial 20% in Three Weeks
Since the start of the US blockade on April 13, the Iranian Rial is down 20 percent against the Dollar. We're only three weeks into the blockade and this is the most visible sign it's already meaningfully disrupting Iran's economy....
Rule of Law Fuels US’s Cheap Debt Advantage
Latest episode by @baselinescene and Gary Gensler on their "Power and Consequences" podcast on the importance of rule of law and institutions that underpin the exorbitant privilege of the US, i.e. our ability to issue debt cheaply. An absolute must...
Avoid Repeating 2022 Russia Mistakes Amid US Blockade
Pushback to the US blockade reminds me of the joke where an Irish farmer is asked for directions to Dublin. He says: "I wouldn't start from here." We are where we are. Better to learn from the mistakes we made...
Japan's Debt, Not FX Intervention, Drives Yen Rise
After last week's intervention, $/JPY is climbing back towards 160, which repeats the pattern we saw in 2024 and earlier this year. Intervention is just treating the symptom. Japan's mountain of high public debt is the cause. That's what needs...
US Tariffs Cripple German, Italian Auto Exports, Sweden Holds
The threat of higher US tariffs on imports of vehicles from the EU hits Germany (blue) and Italy (purple) hard. Both have already seen the US fall sharply as an export market since the start of 2025. Others, including Sweden...
Narratives Clash over Effectiveness of US Iran Blockade
Narrative shift on the blockade 1. The US blockade won't work 2. It works, but Iran can outsmart it 3. It works, but it's slow and incremental 4. Wow, it's hitting Iran quite badly already 5. The US blockade was a good idea 6. Should've done...
US Blockade Sparks Panic, Capital Flight, Rial Collapse
An underappreciated channel of how the US blockade works is to cause panic and capital flight in Iran. That's why the Rial is falling sharply. A country like Iran sees its currency as a status symbol, so they'll have resisted...
Japan's Massive Yen Intervention Ineffective Amid BoJ Bond Buying
On Wednesday night, I wrote my usual post flagging the risk Japan would intervene and it did later that night. Its intervention is reportedly as big as in 2024. This didn't work in 2024 and it won't now as the...
US Blockade Stalls Iran, Keeps Oil Prices Stable
Iran's most potent weapon is to cause an uncontrolled rise in oil prices and panic in global financial markets. It hasn't been able to do that, even though the US blockade of Iranian oil is now 3 weeks old. That's...
Live: Japan's FX Intervention Misread, US Leads Standoff
I'm doing a livestream tomorrow morning at 9 am to discuss Japan's latest FX intervention, which is as "lost in translation" as always. I'll also give an update on the US blockade and where we now stand. The US is...
Blockade Needed: Stop Rogue Oil Blackmail After Ukraine Invasion
After Russia invaded Ukraine, Putin used the threat of high oil prices to scare the West into inaction. That's why I now support the blockade. We cannot allow rogue oil exporters to blackmail us. The cost of appeasement is visible...
Blockade Needed to Cut Off Dangerous Oil Exporters
I first proposed a blockade on March 16, one month before it got announced. Whatever you think of Trump, he's right on this. Only way to counter a dangerous oil exporter is to cut off its lifeblood. That's what 4...
US Blockade Pressures Iran, Mirroring Hormuz Tactics
The US blockade aims to do two things: (i) give Iran a taste of its own medicine for blockading the Strait of Hormuz; (ii) send Iran’s economy into a tailspin and thereby bring the regime to the negotiating table in...
Meeting Maurine Haver Before Oil Price Blockade Talk
This is me with Maurine Haver at the Cornell Club yesterday before I’m about to present on oil prices and the Iran blockade to the Forecasters Club of NY. Maurine built Haver Analytics from scratch and is one of the...
Brent Futures Up 85% YTD Challenges Price Hype
Lots of scare stories about how oil prices will rise indefinitely. None mention the fact that the front-month Brent future (pink) is up 85% so far this year. If you think prices should rise more, you first need to explain...