Stress levels are rising if still not flashing red.

Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the hosts and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone, it is Tuesday, 29th of September, 2026, heading into month-end and quarter-end. Curious if that will mean any kind of change in the plot, even if it's just for a day or two. In the bond market, where we have treasury yields, for example, in the U.S., continuing to pressure higher. Saw the 10-year breaching five and a quarter percent yesterday. That's the first time since. It certainly didn't close that high for the month back in 2007. There was a brief high just above that level, but then, and then going further back, we're talking about levels into, I think it's 2002, now I'm forgetting, because it depends where you look on the yield curve, but obviously very far back, and it's not really the nominal level. It's the direction of travel here, which continues to be higher. We're seeing further signs of stress and credit, although stress, quote-unquote, needs to be taken with a pretty decent grain of salt. I mean, we're another nine basis points wider on this Bloomberg high-yield index we tracked, so that's the spread versus U.S. treasuries at 303 basis points, and this is quite a lift off of the recent lows from a week ago, around 265. But if you look at the longer-term perspective here, we're talking about pretty low levels of credit stress still. I mean, from mid-2007 until all the way into early 2021, there was no monthly close that was even below 300 basis points. So 303 basis points is the current state of play, not particularly, you know, high stress levels in the longer-term perspective. But, you know, you see bits and pieces, and again, the direction of travel here is still very much in the wrong way. So, you know, we're talking about a pretty low level of credit stress still. The wrong direction, just was looking at the other day, I looked at what was the Blue Owl bonds, I looked at an Oracle bond for 2036 expiry, seven and a half percent is the implied yield on that one versus what are we at five and a little bit more on the U.S. Treasury of the equivalent expiry. So yeah, we have a bit of stress there. The direction of travel is wrong. It is a tempering risk sentiment. We had a pretty ugly day on the U.S. equity market yesterday. So, you know, we're talking about a pretty ugly day on the U.S. So, you know, we had a pretty ugly day on the U.S. equity Nasdaq 100 down a little over a percent, about three quarters percent negative on the S&P 500. The equal weight, a little bit better than that, but still negative on the day. Russell 2000, somewhat similar. And, you know, higher beta semiconductors, so the SOX index was down a bit more. Very sort of orderly day if in terms of the normal divergences or lack thereof, I should say, across the market. Shooting star day on European, at least the one major index I looked at, the stock 600 and some, you know, negative vibes slightly coming into Europe this morning. But, you know, pretty steady. We're pretty steady here in the market, given where we have gone in yields. And those yields coming in a little bit. We saw a hot Spanish CPI number this morning. That does not get much play beyond just the headline. More important to see the Eurozone and the Germany numbers. But the headline was in 0.3 and 4.9 on the year-on-year. 0.3, that was the month-on-month. And that 4.9 was year-on-year versus 4.6 expected and 4.3 previously. So pretty spicy headline numbers. And the core also slightly higher than expected. 3.1 versus 3.0 expected and 2.9 in August. So, yeah. And then nonetheless, yields managed to come back in a little bit lower this morning. And then I guess I'll round out the sort of the macro and FX space here. Quite a bit to cover. We had, you know, with the higher U.S. Treasury yields, we have seen the dollar affirming a little bit further. We're working into, as the dollar is making its way into the new local highs here. Pretty minor stuff. 113.50 or so was the lows in Eurodollar just before I came in here to record the podcast. Dolly in a little bit steady because of the attempts by Japanese officialdom to do some verbal intervention. We saw that currency diplomat, Mamura, out yesterday talking about, you know, the market needs to heed our warnings. And then we had Finance Minister Katsuyama out talking up the whole U.S.-Japan being on the same page on intervention and not levels, yada, yada. So, the yen is a little bit firmer in the crosses. And, you know, look over at Euroyen or something like that. That chart does still look pretty heavy. But Dolly in is just unable to fall with the firmer and broader dollar. And that's going into all the, you know, the raft of U.S. macro data we have incoming. I previewed that yesterday. I won't run through the whole laundry list today. But today, specifically, we have the JOLTS survey for August. A dislike, sorry, from my part. It can get some market moves or it can move the market, I should say, if it's a particularly large surprise. And then the consumer confidence number for September, which was odd the last time around. Suddenly, people feeling a lot better, according to the survey, last month when it was right in the midst of, it seems to me, all this fresh spikes in energy prices, et cetera. But maybe there was an intramonth dip and people thought things were looking like they were all clear, whatever. So, I'm a bit curious to see if that is mean reverting relative to the prior trend, which was for worsening expectations and present situation. If I recall, at least the present situation certainly was worsening before that odd August jump. Looking forward to today, you know, it is about the U.S. data. We also had an RBA overnight. And here, it was a dovish hike, if you will. So, the bank going ahead with that rate hike that was pretty much priced in. And the guidance being sort of reluctance to continue to ratchet the rate higher was the overall vibe. You know, pretty modestly lower, but obviously, this was a slightly dovish surprise relative to the baseline. And we have Aussie dollar, you know, finding further separation from that 200-day moving average, which is decently above the zero-spot 70 level. And we're following through below that psychological zero-spot 70 level this morning. So, it's kind of getting into the last gasp area for any bullish case. It really just does look like a big consolidation range now after the failure pretty much of that. Yeah. And then, as flagged yesterday, we have this speech at the Labor Party conference from Prime Minister Burnham in the U.K. That's at 2 o'clock local time, 1 o'clock this afternoon, GMT. There was a listener comment on council taxes that had things a bit wrong on the, or very wrong, on the property taxes yesterday. I kind of agree in some ways. So, if you have a sort of a property level that's. Is sort of standard middle class or especially below that in terms of the modest property values, the percentage of a council tax is actually solidly high. But those council taxes are based on 1991 valuations, and the valuation bands stop at quite low levels, at very low levels compared to the prices for high-end real estate. So, as you scale up in terms of the underlying property value, the council taxes get absurdly low relative to the property's value. And I say absurdly. That still may feel like a lot of money. people out there but it's absurdly relative to what property taxes might be in other geographies so i'm partially wrong uh and partially right depending on on your perspective there so just wanted to add that little twist there oh and by the way so i was you know with with all this little ratcheting higher and cds prices and and yield spreads etc uh we have fx volatility has picked up a bit uh vix is pretty pretty calm i dusted off my old global risk model and it's actually in its worst state since um uh since the markets were recovering from that uh episode the liberation day tariff episode back in 2025 so exceeding where we were or going under whatever your perspective is on bad risk or or bad conditions or heightened risk or bad conditions uh slipping worse than the levels that we had on the outbreak of the of the ron moore back in the march time frame this year march april time frame this year so the direction of travel is the important thing there and it's going uh the wrong way oh i did forget to mention by the way so talking about there's some there was some circulation um you know forget you forget where you see some of these comments out there but somebody's circulating the idea that they're convinced that some of the stress and funding markets when i say that you know yield spreads going wider overall global yields heading higher is the idea that japan is moving money back home or keeping money in japan because the yields on offer there are competitive with the global market so that's one of the things that's going to be a big problem with the rest of the world uh increasingly the you know supporting that notion was the news overnight that japan saw a very strong 40-year jgb auction um and uh yeah so again emphasizing that the yen relative to the backdrop looks reasonably stable uh here and then there was this uh this news of this david zervo so we're quite not not notorious but not quite well-known market commentator i think mostly for jeffries uh that he's been hired by scott besant the u.s treasury secretary uh for a role at the uh obviously at the treasury uh you know this is kind of an interesting hire because somebody has a lot of knowledge and experience in the market how the market is read by players in the market rather than somebody coming from a more academic functional uh technocratic angle uh so interesting to see what that means and i do have an ft alphaville a post where they've pulled a bunch of his comments on the markets apparently one prominent things he has said about markets is that he doesn't really think that this treasury rise we have seen has anything to do necessarily with a fiscal crisis, but it's more about competition for capital. And on that front, of course, we're thinking about all this debt being issued to build out the AI data centers. So yeah, just an interesting note there and something to follow up on if you wanted to get into the weeds on what this guy believes and what it could mean for some kind of pivot or otherwise in the way that U.S. Treasury communicates with the market. Oh, and then we had, okay, so it makes sense, directionally speaking, we've talked a lot about gold sort of hanging in there quite remarkably well, given the backdrop of rising yields, et cetera. A couple of times it had dipped to new local lows, but survived that. But yesterday, really a bloodbath and we've gotten fully below that 42, whatever it was, 3550 area support in spot gold and headed as low as sub 4150 levels today. So over a hundred bucks on the downside there. And to what degree is this just the backdrop again of higher yields, higher oil prices, that source of pressure, real yields going higher, what have you. And there was a specific story that's been thrown around as well a lot about Tether. So Tether is the largest stable coin that is fixed to the U.S. dollar. What is the market cap is a hundred and eighty something billion dollars, but around 10% of those holdings are in gold. And then there's been a lot of noise about Tether being something that is enabling Iran to actually consider, continue to have financial transactions with the outside world. There was a Wall Street Journal article touting that a Senate investigation had seen, quote, rampant, unquote, use of Tether in those transactions. So I don't understand how they're going to enforce this, you know, running around and shutting down specific wallets or something like that too, that they're associating with the U.S. dollar. And so you would think if people are like, oh, this could risk some kind of disruption, the U.S. could shut down Tether or something, you would think there would be a big run for the exits and Tether's overall market cap. That has not been the case. I just thought I'd throw that story out there as something that people have been talking about, that potentially they would liquidate their gold holdings on the order of $18 billion if they're somehow in trouble. Do with that story what you will. All right, onto a couple of single things going on here. Talked about SpaceX's Starship launch yesterday. This was their 14th effort to launch the Starship into space. And it was kind of an interesting one because it was multiple angles as the thing was unfolding. So the launch got off the ground. And then there was the bad news, very slightly bad news, that one of the 33, what are they called, Raptor engines on the booster went out. That doesn't really matter. They can lose a couple of those with no degradation of what's mission parameters, whatever you want to call it. And then the second stage got going all according to plan until one of the rockets on the second stage, and there are only six, shut down a bit early. And then there was some doubt on whether the mission would even continue and it would even attempt to get into orbit. And the Starship was carrying a pretty heavy and valuable cargo of these Starlink satellites. So, you know, abandoning would have meant a pretty expensive abandoning of those assets. And then sort of as things were going on live, the decision was made to, no, we'll go ahead and go into orbit. After all, those are pretty cool visuals of the Starship itself spitting out, what was it, 23 or 26 of these version three Starlink satellites, which have pretty amazing specifications, by the way, something like 10 times the version two in terms of the bandwidth and so on. So that was the good news. And then the bad news was that they, they decided to decommission the aircraft on an earlier, on a tighter schedule. So it's only three hours versus 10 hours. And that the Starship blew up basically did manage to reenter the atmosphere, do a burn sort of, you know, orderly get into position for a water landing, but then it blows up sort of as it's hitting the water, even if it did hit the water at very slow speed. I think the booster as well, it was just blowing up, even though I had a much more controlled landing than the Starship 13 booster. So, you know, long story short, it's, it was remarkable success in that it reached orbit. It did release that, the payload, and that's a good result for the long-term growth potentially of Starlink, but they're still having some problems with this rocket. SpaceX was down around 2% yesterday, not that much worse than the market given where the beta of that stock is anyway. And then we had Nvidia out with a $150 billion buyback. It managed a positive day with the negative backdrop. So that's a solid performance, but that's a hefty buyback and some hefty support for that stock. You could argue that the concern would be that, well, they're buying back their shares rather than investing in growth, but company of that size, that's just what happens these days. And then there's Tesla. So Tesla had an ugly couple of days, down 7% or 8% over those two days. You've really had a lot of trouble with that. So Tesla had an ugly couple of days, down 7%. You've really had a string of releases and news from this company that are trying to give a sense that there's some serious momentum going on. There was that CyberCab event that got initially some really positive reaction, followed by skepticism around the regulator and just banal things like, let's say a CyberCab has an accident or is incapacitated somehow and a rescue crew needs to do something. How exactly are they supposed to sort of do that? of entry up to the rest of the industry yeah i don't know what to to say here beyond the fact you know beyond the fact that it's going to be very interesting to see how the market actually greets this company when its shares do hit the market a few good links i think you'll find in today's podcast episode description uh there's the you know this guy's this guy on x he's quite widely followed talking about the hormuz traffic flows are up to 94 of what they were before the conflict and somebody commenting on that so yeah well if that's the case why the heck is oil still here and diesel still there it feels like these hormuz flows data and spin is propaganda and i don't really know what the actual state on the ground or on the sea i should say is here but um yeah there's that one there's isabella kamenska with a really interesting poster i think it was referenced to another post as well talking about how ai assistance could be really tricky for the bank system if if a gentic ai can do such stuff like you know sort of removing a lot of these these uh little uh not necessarily frictions but inefficiencies that that the market um or various companies enjoy things like banks and the very cheap funding in your your basic checking or savings account where they're not paying you anything if you have a a bank or a digital bank or whatever where you can sweep funds into a uh you know into a vehicle that's getting the market rate every night that's that source of cheap funding could could dry up for the benefit of course of savers but to the detriment of banks so there's a lot of disruption potential out there from ai assistance and not just from the sort of digital digital digitalization of everything but from these things just carry out tasks that you wouldn't have to worry about doing uh yourself interesting angle there and then michael cow this is a guy i think he's a must follow really cool comments on on the market often contrarian um plenty of humor often what he's saying as well makes the point says look you know if if we're off you know the markets are off here because they're rate sensitive they're an awful lot of very very speculative stocks that are trading at wild multiples that are not seeing any sensitivity at all uh so you know something doesn't add up and i would agree with that so you have pockets of the market that are still sort of still in and this is me you know and with inference on what he's saying uh that are still in sort of full-on uh speculative mode and ignoring rates whereas other parts of the market are clearly under pressure and is likely linked to what interest rates have been doing of late uh there was that uh what's his name david servos um appointment of the treasury quotes from ft alphaville and uh there is a longer form piece from michael every i talked recently about that must listen podcast on macro voices do have a listen to that if you get the chance but he wrote a six-page piece and put it out yesterday very odd if you you try to use the link on the website or at least i tried to this morning didn't work but he put a link up on linkedin that does work to the six pager just talks about the whole range of concerns he has especially of concern would be if he is right that uh that we could see simultaneous escalation in the middle east conflict with iran and in ukraine russia and maybe that that is coordinated so this is uh this is uh i still think geopolitics geopolitics has the potential for some ugly disruptions let's hope not of course all right that is a wrap for today we're heading into month end and quarter end uh whatever that is going to mean for for bonds and for equities and we're heading straight into uh the uh interesting cavalcade of u.s data as the week gets into friday and as well we have these these treasury yields pinned near the highs of the cycle it's all pretty a pretty intense cocktail stay careful out there and we'll be back tomorrow with the next saxon market call this has been the saxo market call podcast thanks for joining today's episode we're always happy for your feedback and questions of all kinds to reach out you can drop us an email at market call at saxobank.com that's market call at saxobank.com saxo serious trading worldwide and we'll see you next time