Surging Bond Yields Pile Pressure on the Fed

The Supreme Court averts a potentially chaotic shake-up of male ballot rules ahead of the midterms. Plus, the 10-year treasury yield hits its highest level in almost two decades, and if you're hoping to get away from business news, don't go to the movies. Hollywood is a long history of making films about the most socially relevant topics, and of course, in 2026, the most powerful, compelling people in the world are from the tech industry. These are the titans who shape our lives. It's Tuesday, September 15th, I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. The Supreme Court has blocked the Trump administration's push to create new rules for male ballots, setting off changes that state and local officials said would have been logistically impossible ahead of November's midterms. In an unsigned one-paragraph ruling, the court said that the U.S. Postal Service can't enforce the rules that would have compelled states to quickly redesign their ballot envelopes, submit lists of voters to the federal government, and get signed off from postal officials before ballots could be sent out. Nevada's Democratic Secretary of State Cisco Aguilar said the ruling was particularly important for states like his, or people primarily vote by mail. We start planning for the election right after the past election. We've been planning for this since November of '24, because that's our responsibility. That's our duty. That's what we owe Nevada and across the state to have safe, secure, and accessible elections. And Nevada does what it needs to do in order to make that happen. And the fact that today, the Supreme Court put away the chaos and the lack of leadership from this administration to say, hey, it's states that run elections, and states are going to make the decisions that are in the best interests of its citizens and the best interests of the voters. President Trump has frequently criticized mail voting, saying it's rife with fraud, something that Attorney General Todd Blanche echoed in an interview with CBS shortly before the ruling. What President Trump is doing and what the executive order that President Trump signed wants to do is make sure that we're eliminating fraud in our elections. And so there is, I don't even think that, well, any honest broker will concede that mail in voting, even though there are benefits, especially for people in our military, people who can't go to the polling stations, the potential for fraud is obvious. There is no documented evidence of widespread fraud tied to mail ballots, which are used by nearly a third of American voters. The Environmental Protection Agency has said it will unwind two key carbon dioxide emission rules as part of a wider effort to curb the agency's role in regulating climate change. The first would reverse Biden-era policies to crack down on pollution from coal and newly built natural gas power plants, while the other concerns the EPA's broader authority under the Clean Air Act, which could prevent future administrations from regulating power plant emissions, as EPA Administrator Lee Zeldin explained. The reality is that America produces energy better and cleaner than anywhere else in the world, and our power plant should not be so absurdly targeted. It finalized as proposed energy producers will be given certainty for the future. The move to unwind EPA regulations is considered a victory for the fossil fuel industry, which is pushed back against federal climate regulations. President Trump has framed fossil fuels as vital to economic and national security. The Board of the Kennedy Center, which President Trump hand picked, says that the performing art center could close as early as today, unless the president's fundraising efforts are properly recognized by having his name put on the building. A federal judge in May ordered Trump's name to be removed from the building's facade, saying that only Congress could rename the institution. And Senator Mitch McConnell has returned to Congress for the first time in three months. The Kentucky Republican didn't answer questions when he was wheeled from his home, heard here courtesy of WUSA 9. Senate officials barred the press from filming brief remarks that McConnell made outside the chamber. We report that he said it was time to get back to work, though his words weren't clearly enunciated, and at times were hard to make out. McConnell, whose 84, was hospitalized in June after losing consciousness and falling, and his absence reignited questions about whether lawmakers with significant health issues should remain in office. McConnell isn't seeking re-election with his term set to end in January. The Fed is kicking off two days of meetings today, culminating in what we expect to be a rate hike tomorrow afternoon. The likelihood of that started to cement itself on Friday, following a firm 3.4% inflation reading, but markets since then have been far from quiet between an escalation of fighting in the Middle East and new AI safety risks that triggered a chip sell-off yesterday. And with a 10-year U.S. Treasury yield now holding above 5%, and almost 20-year high, it's clear that the global bond sell-off that had been all the talk of investors just a week ago hasn't gone away. For more on that, we're joined by Xi Loh, senior market strategist for BNP Paribah asset management based in Hong Kong. Xi this week is off to quite a dramatic start. Is it not between energy prices rising and AI stocks losing some ground yesterday? Well, it seems to me that every week starts off with all these flaws and volatility. Pretty much the market I think has priced in two rate heights this year, September and December. And of course, the reason for that is a combination of all worries, including the U.S. debt situation, President Trump's intervention in the effect policy making process and so on, which doesn't really help invest the confidence. And added to these all worries, all the concurrent new worries, the Middle East war, concerned about AI bubbles, the significant rise in Treasury yields in the past few weeks and so on and so forth. So with the economy, the liver market in the U.S. still holding up well, an inflation has been sticky, it is pretty reasonable to expect the Federal Reserve will hike, interest rate by a 25 pieces point is Wednesday as an insurance to make sure inflation won't go up further. Do you see that more as something driven by economic necessity or at this point more of a demonstration of the Fed's own credibility? It is a combination of both I would argue because inflation hasn't come down back to the 2% target. So as a central bank Federal Reserve must do something to protect its credibility. Now at the Fed, I believe they still think the energy crisis that we are facing today is a one-time shock. But the problem is that if this one-time shock doesn't go away soon and become a very prolonged shock, it could fit into inflationary expectations, which is not what the Fed wants to see. And when you look at the data, long-term inflation expectations in the U.S. has been creeping up over the past few months. And if the Fed keeps looking through that, it will certainly hurt its credibility going forward which will in turn hurt investor confidence in the Fed policy approach. Because we've seen some trends, right, that suggests that credibility may be under some threat. Japanese government pension funds looking at scaling back some of their treasury holdings in Norway, right, looking at trimming its allocation to treasuries, the Dutch bringing some gold back out of North America. This is maybe something that resembles a pattern, not a series of one-half events. I would agree. And I would also add that in the U.S. they have an additional problem that the president is trying to intervene in the Fed policy-making process. President Trump would like to see rate cuts instead of rate heights. And if Chairman Wash is going for a rate height, he says, rate cuts, there could be reaction from the president, from the treasury. And the treasury has been buying U.S. bonds, long bonds, and trying to cap the rise of long-use, which is a market signal that inflation needs to be kept, policy needs to be tightened. So there's political intervention in the U.S. as well that raises investors concerned about the Fed's independence. Because you brought it up, I'm curious what the lasting significance we should read into those moves to buy back treasuries. Did the lack of a market reaction to that prove the U.S. has not very many good options to tame U.S. yields? Well, indeed, there is a significant message from the market to the U.S. treasury about the move to buy long bonds. You actually haven't come down as hoped. The message to put it bluntly is that investors don't buy the action by the U.S. treasury to keep long-use down, because the action does not change the fundamentals. And if the treasury of the U.S. government doesn't implement measures to change the fundamentals, then the market will not trust whatever actions the treasury or even the Fed will implement going forward. Now, what are these fundamentals? The fundamentals is that, first of all, there's this inflation creeping up. But in the medium-long term, the concern that the market has always had, the fiscal debt burden, the fiscal responsibility. And if we are not seeing the U.S. administration doing something to fix those problems, then the market will always want to ask for a higher term premium if they are going to invest more in U.S. treasury. I'm sure the floating of a $5,000 checked every U.S. adult citizen probably didn't help in that respect. No, I think it will just blow up the fiscal deficit and investors more concerned about fiscal discipline in the U.S. I've been speaking to Shiloh, senior market strategist for BNP. Paribah asset management joining us today from Hong Kong. Shiloh, thank you so much for being with us on what's news. - Pleasure. - Thank you. - Coming up, we'll get more on what's driving oil prices higher and entertainment reporter Ben Fritz looks at Hollywood's latest obsession, tech execs, that and more after the brain. (upbeat music) Well, as you touched on in our interview earlier, the recent run up in energy prices is showing few signs of slowing with Brent and WTI crew both moving higher today. As journal Energy Markets reporter Rebecca Fung explains that comes amid signals that Middle Eastern energy supplies will keep struggling to reach global markets and that various forces that have stabilized prices in recent months could be starting to weaken. - So there was a attack on the East West pipeline in the Kingdom of Saudi Arabia last week and our reporting is showing that the kingdom is raising to repair this pipeline because it's been one of the key infrastructure why the Kingdom of Saudi Arabia has been able to kind of keep production and exports fairly high. We have reported that partial operations should be able to resume within days but to fully repair the damaged pumping stations along this pipeline will take as long as six to eight weeks. And that's according to people familiar with the matter. In the meantime, the kingdom is going to ramp up shipments through the street of Hormuz, but for weeks now, the traffic has been pretty low across the street and Iran has said already that the war won't end until all of the parties in the Middle East region are on the same page. And it's hard to imagine that the conflict which is resolved within a short period of time and Saudi oil can pass the street. Another factor that's been keeping oil prices kind of in check this year is China has been slashing its crude oil imports since the beginning of the war. China is the world's largest crude oil importer and we're seeing a tick up of China buying in August. So if China returns to the market in a meaningful way, then oil prices will certainly be pushed up by higher demand. Well, new data from China meanwhile confirms that weak domestic demand in the country isn't going away even as strong overseas demand for Chinese products like lithium ion batteries, robots and 3D printing equipment boosted industrial production. According to government figures, investments into fixed assets and property have slumped while retail sales remain tepid. All of which is pointing to K-shaped growth with external demand significantly eclipsing domestic demand in the world's second largest economy. However, Chinese state media is pushing back on what it calls that Western yardstick arguing that its economy is instead shifting from old to new growth drivers through its digital transformation and green transition. And finally, if you felt like AI executives are dominating the headlines a little bit too much lately, Journal Entertainment reporter Ben Fritz told us that you might want to avoid the movie theater this fall as a number of big films about tech industry titans prepare to hit the big screen. There's a sequel to the social network called the social reckoning that's written and directed by Aaron Sorkin and it's about the Facebook files, series in the Wall Street Journal, of course, and all of the alleged problems that Facebook and Instagram were causing for the world that the company knew about and then disclosed. People can post what they want. We're not the rest. We're the public square. Are you crazy? You're like a crossing guard standing in front of a school but you're not doing anything with your arms. So the cars are just plowing down the children. There's a movie called Artificial that is primarily about Sam Altman. We open Pandora's box together. The future's inevitable. And it's a very damning portrayal of the open AI CEO. There's a new documentary about Elon Musk directed by Alex Gipney that is very critical. portrayal of him and all the power he has amassed in business and politics. These chaotic, random, capricious, manifestly cool and selfish. And then the weirdest of lunch is a documentary about Elizabeth Holmes, the disgraced founder of Theranos. Nathan Fielder, he embedded with Elizabeth Holmes in the week leading up to her imprisonment and produced what people who've seen it have said is a very bizarre, fascinating look at her. I don't have anything to deceive you on. Of course, I'm not deceiving you. I'm engaging with you as a human being. In 2026, the most powerful, compelling people in the world are from the tech industry. And of course, filmmakers want to tell stories about them, to critique them, to portray them in a different light, to provoke people, to think about them differently. And these movies are all highly anticipated by people in the film industry, by cinephiles. We'll see if any of them break out with a general public. Before we go, a quick correction. Nathan Fielder is the creator of the HBO television series, The Rehearsal, an earlier version of this podcast incorrectly said he was the creator of the audition. And that's it for what's news for this Tuesday morning. Today's show was produced by Daniel Bach, our supervising producer, his Sandra Killhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.