TMGM Daily Market Breakfast: 10 September 2026

Morning Snapshot

• The European Central Bank was widely expected to raise rates by 25 basis points on Thursday, taking the deposit rate to 2.50% and the main refinancing rate to 2.65%, as higher energy prices and persistent inflation kept policy tightening in focus.
• U.S. long-dated Treasury yields pushed to fresh cycle highs after the Treasury set the maximum size of its first expanded long-end bond buyback operation at $6 billion, with the 30-year yield rising above 5.3% and the 10-year touching 4.865%.
• Brent crude climbed above $100 a barrel and settled at $101.21, while WTI traded around $93-$94, as escalating U.S.-Iran tensions and renewed concerns over Strait of Hormuz flows kept supply risks elevated.
• Bank of Japan board member Kazuyuki Masu said Japan's policy rate remained below the estimated neutral range and that the central bank expected to continue raising rates under still-accommodative financial conditions.
• A Reuters poll showed economists expect the Bank of Japan to raise rates to 1.25% at its September meeting, with markets also fully pricing a 25-basis-point increase as the yen held near multi-month highs.
• The U.S. dollar remained soft ahead of key inflation releases, with the dollar index trading around 98.70 and attention turning first to August producer prices and then to the August CPI report ahead of the Federal Reserve's September 16 decision.
• The Dow Jones Industrial Average slid roughly 440 points and fell below 52,400 as higher long-term Treasury yields and disappointment over the Treasury buyback operation weighed on risk sentiment.
• EUR/USD held around 1.1635-1.1650 ahead of the ECB decision, while USD/CAD traded near 1.3820 and EUR/CAD around 1.6060 as investors stayed cautious before major policy and inflation events.

Market Developments

Government Bonds

U.S. Treasury yields moved higher after the Treasury set the maximum size of its first expanded long-end buyback at $6 billion. The 30-year yield rose above 5.3%, reaching its highest level since 2007, while the benchmark 10-year yield touched 4.865%. European yields also moved higher, with euro swaps rising around 8 basis points across the 2-year to 10-year curve and markets pricing 86 basis points of further ECB hikes by the June 2027 meeting.

Energy

Brent crude rose 3.36% to $101.21 a barrel, its highest close since May and the first move above $100 since July, while the 6-month Brent future gained 1.55% to $86.09. WTI settled just above $94.00, up more than 2%, later traded around $93.85 and was seen near $93.20 in early European hours as profit-taking followed a three-day rally.

Foreign Exchange

The U.S. dollar index traded around 98.70 after four straight daily declines. EUR/USD held above 1.1600 and traded around 1.1635-1.1650 ahead of the ECB decision, USD/JPY traded near 153.45 after falling to 152.89 on Wednesday, USD/CAD traded around 1.3820, and EUR/CAD was near 1.6060.

U.S. Equities

The Dow Jones Industrial Average fell roughly 440 points and traded below 52,400 as the Treasury buyback announcement failed to calm long-end yields and higher borrowing costs weighed on sentiment.

Macroeconomics & Central Banks

ECB Set for 25-Basis-Point Rate Increase as Energy Prices Lift Inflation Risks

The European Central Bank was set to announce its latest policy decision at 12:15 GMT on Thursday, with markets and economists broadly expecting a 25-basis-point increase that would lift the deposit rate to 2.50% and the main refinancing rate to 2.65%. The expected move would mark a second increase in the current tightening cycle and take policy rates to the top of the ECB's estimated neutral range of 1.75% to 2.50%.

Higher oil and natural gas prices over the summer have pushed European yields to multi-year highs and reinforced expectations of a more hawkish ECB path. Markets had priced an additional 9 basis points of hikes by the June 2027 meeting, leaving 86 basis points of further tightening priced in by then. Deutsche Bank said its economists expected small upward revisions to euro-area GDP projections for 2026 and 2027, along with higher headline inflation forecasts for 2027 and 2028.

The key question for markets was not the expected September move itself, but how President Christine Lagarde would frame the path ahead. Several bank previews said the ECB was likely to retain a data-dependent, meeting-by-meeting approach without formal forward guidance. Societe Generale said wage dynamics and updated staff forecasts would be central to judging how far tightening might extend, while Danske Bank said Lagarde was expected to preserve full optionality on future moves.

The euro traded around $1.1635 to $1.1650 ahead of the decision, having moved back above its 200-day moving average near 1.1635. EUR/CAD held around 1.6060 as investors waited for the ECB outcome.

Bank of Japan Rate-Hike Expectations Build After Masu Signals Further Tightening

Bank of Japan policy board member Kazuyuki Masu said the policy rate remained below the bank's estimated neutral range and had been below that level for a very long time, adding that this needed to be fixed soon. Masu also said the BOJ expected to continue raising interest rates given still-accommodative financial conditions, while noting that underlying inflation was gradually approaching 2% but was not seen overshooting that level.

The remarks came as a Reuters poll showed economists expect the BOJ to raise rates to 1.25% at its September policy meeting and then to 1.75% in the second quarter of 2027, earlier than previously expected. Separate commentary in the reporting window also described a September increase as almost certain, with markets fully pricing a 25-basis-point move at the September 17-18 meeting.

Japan's recent data backdrop has reinforced expectations of further normalization. Commentary during the period cited final second-quarter GDP growth of 1.4% quarter-on-quarter saar, or 0.9% year-on-year, while July wage data showed total wages and base wages rising 4.7% and 4.1% year-on-year respectively. Analysts also pointed to rising Japanese government bond yields and stronger domestic fundamentals as factors supporting the yen.

USD/JPY traded near 153.45 on Thursday and remained close to Wednesday's more than six-month low of 152.89. Separate reports said the pair had slipped below 153 as markets weighed BOJ tightening expectations and warnings from U.S. Treasury Secretary Scott Bessent against testing Japanese authorities' resolve on yen intervention.

U.S. Inflation Data Takes Center Stage Ahead of September Fed Decision

Attention in the United States turned to August producer prices due at 12:30 GMT on Thursday, followed by the August CPI report on Friday, with both releases seen as important inputs ahead of the Federal Reserve's September 16 policy decision. The dollar index traded around 98.70 after four consecutive daily declines, while market commentary described the greenback as directionless near recent lows.

Brown Brothers Harriman said the August CPI report remained the main near-term driver for the Fed decision, while producer prices would serve as a warm-up. The bank highlighted the PPI services measure excluding trade, transportation and warehousing as particularly relevant because it partially feeds into the policy-relevant PCE calculation. It also noted that portfolio management fees could again distort PPI before a Bureau of Economic Analysis methodology change due on September 30.

Currency markets remained cautious before the releases. USD/CAD traded around 1.3820, up 0.11% on the day, while EUR/USD held above 1.1600. Several reports noted that headline PPI inflation was likely to have increased because oil prices had risen again, although no official data had yet been released within the reporting window.

Government Debt & Markets

U.S. Treasury Buyback Expansion Fails to Calm Long-End Yields

U.S. Treasury yields climbed after the Treasury set the maximum size of its first expanded long-end bond buyback operation at $6 billion, triple the previous $2 billion size but below some investors' expectations for a larger first step. The 30-year Treasury yield rose above 5.3%, reaching its highest level since 2007, while the benchmark 10-year yield touched 4.865% earlier on Thursday.

The move extended a sharp recent rise in long-term borrowing costs. Reporting during the period said the 10-year yield had climbed 25 basis points in less than two weeks and about half a percentage point since late June. MUFG said the Treasury's August 19 announcement that it planned to at least double the size of long-term bond buybacks had already undermined confidence in the U.S. dollar over the summer, and further details released this week prompted another rise in long-end yields.

MUFG estimated that if the Treasury continues to conduct nine buybacks per quarter and purchases up to $6 billion at each operation, annual purchases could total just over $200 billion. Danske Bank said the $6 billion size applied only to Thursday's operation and did not set the size for later buybacks.

The market reaction spilled into equities. The Dow Jones Industrial Average fell roughly 440 points and traded below 52,400 as the Treasury bid fell short of calming the long end of the curve.

Geopolitics, Energy & Commodities

Oil Holds Near Multi-Month Highs as U.S.-Iran Conflict Keeps Supply Risks Elevated

Oil prices remained elevated after a sharp rally driven by escalating U.S.-Iran tensions and renewed concern over shipping through the Strait of Hormuz. Brent crude rose 3.36% to $101.21 a barrel, its highest close since May and the first break above $100 since July, while the 6-month Brent future gained 1.55% to $86.09, its highest level since early June.

WTI also surged during the reporting period, settling just above $94.00, up more than 2% and at its best level since May 22. It later traded around $93.85 and then near $93.20 in early European hours as some profit-taking emerged after three days of gains.

Reports during the period said the latest U.S.-Iran strikes had raised doubts that the Strait of Hormuz would reopen soon. ING said Persian Gulf tensions showed no credible path to de-escalation, while Deutsche Bank cited a Wall Street Journal report that White House advisers had privately raised with President Trump the prospect that the war could continue for the remainder of his term. ING also said Iran had signaled readiness to intensify the war.

Additional supply and demand details remained in focus. ING said overnight API data showed U.S. crude inventories fell by 300,000 barrels over the last week, while Chinese crude buying had picked up in the physical market, particularly in the North Sea. The bank said Chinese import behavior would be important for how long the current oil rally persists.

Upcoming Key Events

• European Central Bank Policy Decision — 12:15 GMT: The ECB is due to announce its September policy decision, with markets widely expecting a 25-basis-point rate increase to take the deposit rate to 2.50% and the main refinancing rate to 2.65%.
• U.S. August Producer Price Index — 12:30 GMT: The United States is due to release August producer price data ahead of Friday's CPI report, with markets watching the release for signals ahead of the Federal Reserve's September 16 decision.
• U.S. August Consumer Price Index — null: The August CPI report is due on Friday and remains the main near-term data release for assessing the Federal Reserve's September 16 policy decision.
• Bank of Japan Policy Meeting — September 17-18: The Bank of Japan's next policy meeting is scheduled for September 17-18, with economists and market pricing pointing to a 25-basis-point increase that would take the policy rate to 1.25%.