Fresh tremors

Mike, last week was all about geopolitical talks and bonds.

This week, we're getting a lot of economic data and it's still completely unknown how the bond market is going to react.

Let's unpack last week a little bit before we get into what's up ahead, because it was a dramatic week.

There's no doubt for all that was happening at the UN.

The big story for financial markets, obviously, was the bond market shakeout.

And we look at those levels where we're at now from five years right out to 30 years, we're above 5%.

The 30-year bond is above 5.5%.

And they're all kind of levels, certainly the long end, that are highest since before the great financial crash in 2007, 2008, right? So we're back at those levels.

And we have almost 100 basis points of additional Fed tightening in the futures market.

So what was behind that? I mean, look, we had a lot of pretty...

racy economic numbers, we had the business surveys from early September, which really were well above forecast.

And that wasn't just in the United States, it has to be said.

We also had, of course, the rising oil price, another jump as the impasse between the United States and Iran.

continues, despite hopes that maybe the UN meeting might have had some breakthrough.

It didn't happen.

And this morning, we're looking at $108 or more on the Brent crude prices.

So all those ingredients have been behind the boy.

But what was one incident, I think, that didn't get as reported as much as the others, which is that On Wednesday, there was a five-year treasury auction, and that went particularly badly.

Now, the details of this get into the weeds of auctions, but essentially there was a 3.1 basis point tail.

Now, a tail is the difference between what everyone kind of is guided towards as the auction price or the yield on that auction.

as opposed to what ultimately was demanded.

And that was the second worst tail in auction history.

So the demand was its weakest since 2018.

So there is here going forward, not just all of the economic and energy and geopolitical worries that are feeding into this bond price.

There is increasingly an auction risk that may emerge as well.