TMGM Daily Market Breakfast: 1 October 2026

Morning Snapshot

• U.S. Treasury yields climbed to multi-decade highs, with the 10-year at 5.33% and the 30-year at 5.67%, as higher oil prices kept inflation risks in focus.
• August U.S. PCE inflation came in softer than expected, with headline inflation at 3.4% year-on-year and core PCE at 3.0%, while July readings were revised lower.
• Markets scaled back expectations for an October Federal Reserve rate increase after the PCE data, though stronger U.S. GDP and ADP employment figures kept the broader policy debate open.
• Minneapolis Fed President Neel Kashkari said inflation remains too high at about 3% and warned that further rate increases would put pressure on different parts of the economy.
• Bank of Japan September meeting opinions showed some members backing further rate increases in line with inflation and financial conditions, while others warned against hasty tightening because of weak private consumption.
• Brent crude rose to $103.53 a barrel and WTI to $90.42 as the re-escalation of the U.S.-Iran conflict and stalled negotiations kept energy supply risks in focus.
• The U.S. ordered the Iranian delegation to the United Nations General Assembly to leave the country immediately after talks stalled, according to Axios.
• The Reserve Bank of Australia said households, businesses and banks remain broadly resilient, even if house prices were to fall a further 20%, while warning that major financial-stability risks are coming from abroad.
• China unveiled targeted support measures including a 25 basis point cut in the PBoC’s one-year PSL rate to 1.50% and expanded relending quotas for technology, agriculture and small businesses.
• President Donald Trump announced a $200 billion South Korean investment plan in the United States, including $54 billion for an Alaska liquefied natural gas project.

Market Developments

Government Bonds

U.S. Treasury yields rose sharply, with the 10-year reaching 5.33% and the 30-year 5.67%, while Deutsche Bank said 10-year Treasury yields were up for a seventh consecutive month, the longest such run since 2011.

Energy

Brent crude rose 0.92% to $103.53 a barrel and WTI gained 1.16% to $90.42, while WTI was also reported trading near $91.00 in European hours after rebounding from below $88.00.

Foreign Exchange

EUR/USD traded around 1.1363 after touching 1.1312 earlier in the week, USD/JPY was reported around 156.80 after falling 0.30% on Wednesday and later around 157.60, and USD/CAD traded near 1.4180 after retreating following the U.S. inflation data.

Macroeconomics & Central Banks

U.S. Inflation Revisions Temper October Fed Bets but Leave Policy Debate Open

August U.S. inflation data came in softer than expected, with headline PCE inflation unchanged at 3.4% year-on-year against expectations for 3.7% and core PCE steady at 3.0% versus a 3.3% forecast. July readings were also revised lower to 3.4% for headline PCE and 3.0% for core PCE. On a monthly basis, headline PCE rose 0.3% and core PCE increased 0.2%.

The softer inflation readings led markets to scale back expectations for an October Federal Reserve rate increase. Deutsche Bank said pricing for an October hike fell to 37% from 47% the previous day, while the amount of tightening priced by year-end fell by 2.5 basis points to 29.6 basis points. Other reports said October hike odds had dropped sharply from around 70% earlier in the week.

At the same time, the broader U.S. macro backdrop remained firm. Second-quarter GDP growth was revised up to an annualised 2.2% from 1.5%, while ADP said private-sector employment rose by 90,000 in September, above expectations for 70,000 and up from a revised 36,000 in August. Several economists said the downward inflation revisions reduced the urgency for immediate action but did not materially change the picture of resilient demand, firm consumption and inflation still above the Fed’s 2% target.

Fed Officials Keep Focus on Inflation as Kashkari Warns on Further Tightening Costs

Federal Reserve officials continued to stress that inflation remains too high despite the softer PCE report. Minneapolis Fed President Neel Kashkari said inflation is still around 3% and that the latest data do not alter his outlook. He also said that if rates keep rising, the pressure will fall on different parts of the economy.

Fed Governor Lisa Cook said inflation has stayed too high for too long and reiterated her commitment to returning inflation to the Fed’s 2% goal while preserving labour-market strength. The comments underscored that even after the latest revisions, policymakers remain focused on price pressures rather than declaring victory on disinflation.

Bank of Japan Opinions Show Support for Further Hikes but No Rush to Tighten

The Bank of Japan’s Summary of Opinions from its September meeting showed a hawkish tilt among some members, with one member saying it was appropriate to keep raising rates in line with economic, price and financial developments. Another said the policy phase had shifted and the focus must be on anchoring underlying inflation near 2%, while a further member said the central bank must act nimbly to prevent an inflation overshoot and consider the impact on foreign exchange markets.

At the same time, the discussion also reflected caution over the pace of tightening. Reports on the meeting notes said some policymakers were concerned about weak private consumption and warned against hasty action, while government representatives urged the BOJ to weigh the cumulative impact of past rate increases. The split leaves the BOJ balancing stronger sentiment data, including the most upbeat Tankan reading for large manufacturers since 2018, against concerns about domestic demand.

Eurozone Inflation Runs Hotter as ECB Officials Flag Fiscal and Yield Risks

Germany, France, Italy and Spain all reported September inflation above forecasts, keeping pressure on the European Central Bank as price growth in the region’s largest economies remained firmer than expected. Even so, the euro stayed under pressure and recorded a second straight close below 1.1350 in one report.

ECB President Christine Lagarde said France’s debt situation was serious at 120% of GDP and warned that the country lacked a credible path to lower it. Separately, ECB Governing Council member Isabel Schnabel said high costs are passed through to consumers more quickly when the economy is resilient and indicated that the recent surge in yields could itself help cool inflation pressures.

RBA Says Financial System Is Resilient but Global Risks Are Building

The Reserve Bank of Australia said in its Financial Stability Review that households and businesses are well placed to weather a slower economy and falling house prices. The central bank said that even if house prices fell a further 20%, only 5% of mortgages would be in negative equity, while less than 1% of borrowers are currently in negative equity.

The RBA said banks are well positioned to withstand a material deterioration in the housing market, loan arrears remain low and lending standards are sound. It added that the share of owner-occupier borrowers with a cash-flow shortfall is still low at around 2%, though pressures are set to increase for smaller businesses and energy-intensive firms.

The review said the main risks to domestic financial stability are coming from abroad. It also warned that opaque and circular AI funding structures, the rise of leveraged investors in bonds and AI equities, and high global asset prices and leverage have increased the risk of a disruptive pullback in world markets.

China Unveils Targeted Support Measures Including PSL Rate Cut

China introduced a fresh round of targeted support measures aimed at stabilising growth and supporting property, infrastructure and technology. The People’s Bank of China cut the rate on its one-year pledged supplementary lending facility by 25 basis points to 1.50% from 1.75%.

Authorities also expanded relending quotas by CNY200 billion for innovation and technology sectors and by CNY500 billion for agriculture and small businesses. On housing, first-time buyers of smaller, lower-cost homes were offered mortgage subsidies for up to five years.

The measures were described as incremental rather than sweeping, and one report said they did little to excite equity markets because they fell well short of the broader support package announced in September 2024.

Energy, Bonds & Geopolitics

Oil Rally and Inflation Concerns Push U.S. Treasury Yields to Multi-Decade Highs

U.S. Treasury yields climbed to fresh multi-decade highs as energy-driven inflation concerns intensified. The 10-year Treasury yield rose to 5.33%, while the 30-year yield reached 5.67%. Separate reporting said the move extended a broader global bond selloff, with 10-year Treasury yields rising for a seventh consecutive month for the first time since 2011.

Higher oil prices remained central to the move. Brent crude rose 0.92% to $103.53 a barrel and WTI gained 1.16% to $90.42, with one report noting that Brent’s front contract would mechanically fall toward $98 because of a month-end benchmark roll. Strength further out the curve was also notable, with the Brent future for December 2027 rising 0.54% to a new high of $81.25.

Reports linked the energy move to renewed scepticism that the United States and Iran would reach a deal soon, even as some Middle East oil flows recovered to pre-war levels. WTI was also reported trading near $91.00 in European hours after rebounding from below $88.00, and one report said the contract remained on track for a monthly gain of around 5.5%.

U.S. Orders Iranian UN Delegation to Leave After Talks Stall

U.S. Secretary of State Marco Rubio told the Iranian delegation to the United Nations General Assembly to leave the United States immediately after talks stalled, Axios reported. The move marked a further deterioration in U.S.-Iran relations during a period when markets were already focused on the implications of stalled diplomacy for energy supply risks and shipping through the Strait of Hormuz.

Government Policy & Investment

Trump Announces $200 Billion South Korean Investment Plan in U.S. Projects

President Donald Trump announced a $200 billion South Korean investment plan in the United States. Reuters reported that $54 billion of the total is slated for a liquefied natural gas project in Alaska.

The announcement adds a large cross-border investment commitment to U.S. energy and infrastructure development, with the Alaska LNG component standing out as the single largest identified allocation in the package.