Weekly house view | Bonds not Ha-PPI
The week in review
Treasury bond yields ended the week near multi-year highs after the US consumer and producer price indices (CPI and PPI) remained elevated, raising expectations the Federal Reserve will hike interest rates this week. The consumer price data suggested higher energy costs may be passing through to services.
US Treasury Secretary Scott Bessent warned traders not to bet against the yen, declaring: “I am the house now.” He made the comment after news that Japan's foreign reserves dropped by a record USD 80 billion in August due to interventions to prop up the yen.
Meeting in Berlin, the European Central Bank raised rates by 25 basis points and expected “longer-lasting” inflation to drag on well into 2027. German 10-year Bund yields rose above 3.5% for the first time since 2009 as traders bet the ECB would raise rates again this year.
In the Middle East, Saudi Arabia temporarily closed its pipeline bypassing the Strait of Hormuz after drones from Iraq damaged the key crude oil artery. Oil hit USD 109 per barrel.
US diesel prices rose above USD 6 per gallon. President Donald Trump pledged to send every American adult USD 5,000 if Republicans retain control of the House of Representatives and the Senate after the midterm elections.
The S&P 5001 ended the week 0.8% lower.
Quote of the week
"The measures I propose to advance the frontier at a safe pace will not be easy. But I believe we owe it to humanity to try," Dario Amodei, CEO of Anthropic, said in a message that was supported by the chiefs of OpenAI and SpaceX after a researcher warned artificial intelligence (AI) could kill off people before it is curbed.
Key data
US core CPI, which excludes food and energy prices, rose by 0.3% in August, faster than the consensus estimate for a 0.2% increase. Consumer inflation advanced 3.4% year-on-year. US PPI rose 0.4% month-on-month. The University of Michigan's Surveys of Consumers showed its consumer sentiment index fell to 47.8 in early September from 51.7 in August.
Consumers expected higher inflation over the next 12 months and five years.
Japanese workers’ nominal pay rose at the fastest pace in nearly three decades in July
China’s export growth accelerated in August, and its trade surplus reached USD 806 billion for the year
