Overnight

Wall Street closed 26 September mixed. The S&P 500 finished at 7,743.41, up 0.51%, recouping a day's loss, and the Nasdaq at 27,068.72, up 0.48%. The FTSE 100 edged 0.14% higher to 10,695.25. The DAX gained 0.56% to 25,408.64. The trigger was not equity supply: it was the reversal in bond yields after a week of climbing. The ten-year has settled at 5.167%, the first time in twenty years the eric has recorded it above 5.1%, and the market is pricing a Fed holding rate near 3.875% through the next six months.

Asia and Europe

Tokyo opens at 08:00 Hong Kong time with the Nikkei 225 last trading at 66,363.98, a 1.3% overnight gain, the highest since the BOJ's 24 September rate decision at 1.25%. The Hang Seng closed 26 September at 24,510.1, down 1.01%. Hong Kong property stocks are the story: the link between borrowing costs and residential land values has tightened into clarity, and a five-decade high in yields forces a revaluation of the rents that justify the prices. Today's Tokyo open will set the tone. The Bank of Japan has not signalled another move in October, but the market will watch: every 25 basis points of curve steepening costs the ministry of finance and local authorities dearly.

FX, rates and commodities

The dollar strengthened overnight. USD/JPY sits at 157.59, down 0.79% but still a strong half of the recent band, confirming that yen carry trades are winding down in an orderly fashion rather than a route. EUR/USD is 1.1403, up 0.32%, and GBP/USD is 1.3252, up 0.25%, a modest dollar softness in the pairs. Gold is US$4,286.2 and West Texas Intermediate is US$92.41. The eric reports no moves beside either because none are on the tape: a level holds or it does not.

The day ahead

Tokyo's first full cash session under 1.25%, and the market's first chance to reprice yen carry futures and options in live trading. Hong Kong's property stocks will track the ten-year closely. The US Treasury market is watching the 24-26 September auctions for the $900 million in notes the government is issuing, and whether the two-year's 4.7% holds as new money comes in.

One number

5.167%—the ten-year Treasury close on 26 September, the first time in a generation that bond market has opened above 5.1%.

One read

Bond yields surge to two-decade highs on robust growth fears reads the structural shift that pushes Treasury yields higher even as the Fed signals patience: a market repricing the real rate of growth, the risk premium on near-zero yields, and the opportunity cost of holding bonds when the effective funds rate stands at 3.88%.