TMGM Daily Market Breakfast: 29 September 2026

Morning Snapshot

• The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60%, a 15-year high, while keeping the door open to further tightening if needed.
• U.S. Treasury yields pushed to multi-decade highs, with the 10-year at 5.24%, the 30-year at 5.55% and 10-year real yields at 2.89%, as markets priced a more hawkish Federal Reserve path.
• President Donald Trump signaled a willingness to ease sanctions on Iran and unfreeze assets in exchange for progress in nuclear talks, shifting the tone in U.S.-Iran diplomacy.
• Oil markets remained volatile as Brent rose above $107 per barrel and WTI traded around $91-$92, with prices driven by stalled U.S.-Iran diplomacy, a Saudi pipeline restart and a rebound in Middle East exports.
• ECB President Christine Lagarde said the euro zone inflation outlook for 2027 and 2028 had worsened but maintained that a measured policy response remained appropriate.
• ECB policymaker José Luis Escrivá said policy was still not in restrictive territory, while Peter Kazimir said this month’s rate increase was unavoidable and that January repricing would be key.
• Federal Reserve Governor Lisa Cook said future rate decisions would depend on inflation and labour-market data, while warning that AI-related demand and Iran-linked energy risks could keep price pressures elevated.
• The Bank of England held Bank Rate at 3.75% earlier this month by a 6-3 vote, but half of the officials who backed a hold are now saying a rate increase may be needed.
• The U.S. Dollar Index traded around 101.20, USD/JPY rose to about 157.40 and USD/CHF touched 0.8327, reflecting firm dollar demand alongside elevated U.S. yields.
• Australia’s 10-year government bond yield rose to around 5.42%, its highest level since 2011, after the RBA’s latest rate increase.

Market Developments

Rates & Bonds

U.S. Treasuries extended their selloff, with the 10-year yield rising 7.6 basis points to 5.24%, the 2-year up 7.9 basis points to 4.93% and the 30-year up 5.6 basis points to 5.55%, while 10-year real yields climbed 7.1 basis points to 2.89%. Australia’s 10-year government bond yield traded around 5.42%, a post-2011 high.

Foreign Exchange

The U.S. Dollar Index traded around 101.20. USD/JPY rose to about 157.40, while USD/CHF touched a fresh 16-month high of 0.8327. The Australian dollar initially rallied after the RBA decision before reversing, with AUD/USD falling below 0.7000 and trading around 0.7020 at one stage, while AUD/JPY rose to near 110.70 and AUD/NZD climbed to around 1.2400.

Energy

Brent crude rose 0.92% to $105.28 per barrel and then climbed a further 1.92% to $107.30, while the December 2027 Brent contract closed at a record $80.29 and later rose to $80.67. WTI traded around $92.05 in early Asia before easing back toward $91.10 as supply headlines offset geopolitical risk.

Macroeconomics & Central Banks

RBA Raises Cash Rate to 4.60% but Governor Bullock Strikes a Less Urgent Tone

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60% at its 29 September meeting, taking the policy rate to its highest level in about 15 years. The decision was unanimous after the RBA had paused at its June and August meetings, and the board said some of the upside inflation risks flagged in August were now materialising. The statement repeated that inflation remained too high and that the bank would be willing to increase the cash rate target further if needed.

The market reaction turned more mixed after Governor Michele Bullock said the board had also discussed holding rates steady. Her remarks highlighted slowing economic growth, easing labour-market conditions, falling house prices, housing-market vulnerabilities and global growth concerns, and she emphasised the lags in monetary-policy transmission. The Australian dollar initially rose on the decision before giving back those gains, with AUD/USD slipping below 0.7000, while Australia’s 10-year government bond yield traded around 5.42%, a post-2011 high.

U.S. Treasury Yields Climb to Multi-Decade Highs as Hawkish Fed Pricing Builds

U.S. Treasury yields continued to rise sharply, extending the bond selloff as markets priced a more hawkish Federal Reserve path alongside higher energy prices. By the close, the 10-year Treasury yield had risen 7.6 basis points to 5.24%, leaving it close to its 2007 closing peak of 5.29%. The 2-year yield rose 7.9 basis points to 4.93%, its highest level since 2024, while the 30-year yield climbed 5.6 basis points to 5.55%, a new post-2004 high.

Real yields were a major driver of the move, with the 10-year real yield rising 7.1 basis points to 2.89%, its highest level since 2008. Futures were pricing a 73% chance of a Federal Reserve rate increase at the next meeting. Separate commentary on U.S. fiscal financing highlighted the pressure from higher rates, with interest spending up by USD 82 billion over the past year to about 4.6% of GDP and an estimated USD 54 billion increase in financing costs if front-end bill funding costs rise another 75 basis points as existing bills roll over.

ECB Keeps a Measured Tone Even as Officials Warn on Inflation

European Central Bank President Christine Lagarde said the euro zone economy continued to expand broadly across countries and sectors, with manufacturing and the labour market holding up well, but warned that inflation in 2027 and 2028 would be higher than previously expected. She said there was still no evidence that price pressures were becoming embedded and maintained that a measured response remained appropriate, describing policy as staying on the “middle path”.

Other ECB officials reinforced that the tightening cycle remains data-dependent but not complete. José Luis Escrivá said policy was still not in restrictive territory, while Peter Kazimir said the rate increase delivered earlier this month had been unavoidable and that January repricing would be a key reference point. The comments came as the euro remained under pressure, with EUR/USD trading near its late-July lows around 1.1350 after traders pushed back expectations for a faster ECB response.

Fed Governor Cook Says Inflation Risks Remain Tied to Data, AI and Iran

Federal Reserve Governor Lisa Cook said the number and magnitude of future adjustments to the federal funds rate would depend on incoming inflation and labour-market data. Speaking in Oakland, California, she pointed to risks that could keep inflation pressures elevated, including demand linked to artificial intelligence and energy-market risks tied to Iran.

Her remarks added to a broader hawkish tone in U.S. rate expectations, with markets already reassessing the path for policy after firm inflation readings and higher oil prices. The combination of persistent price pressures and resilient activity data has kept attention focused on whether the Fed will need to tighten further.

BoE Hold Faces Fresh Scrutiny as Deputy Governors Lean Toward a Hike

The Bank of England kept Bank Rate unchanged at 3.75% on 17 September in a 6-3 decision, but subsequent comments from officials have shifted attention back to the possibility of renewed tightening. Half of the six policymakers who voted to hold are now saying a rate increase may be needed.

The shift in tone helped sterling edge higher and underscored the extent to which central banks remain sensitive to inflation risks even after earlier pauses. The comments also fit a broader global pattern in which higher energy prices are complicating the policy outlook.

Geopolitics, Energy & Commodities

Trump Signals Potential Iran Sanctions Relief as Qatar-Mediated Talks Continue

President Donald Trump is prepared to ease sanctions on Iran and unfreeze Iranian assets in exchange for progress in nuclear negotiations, marking a notable shift after recent tensions over the Strait of Hormuz. Iranian Foreign Minister Abbas Araghchi said Tehran had discussed proposals with Qatari mediators and that the U.S. response would be conveyed back through Qatar.

The diplomatic opening followed a period in which hopes for a deal had repeatedly been frustrated. Markets had recently focused on Trump’s rejection of an Iranian proposal related to reopening the Strait of Hormuz, but the latest sanctions-relief signal suggested negotiations remain active even as the terms of any agreement remain unresolved.

Oil Swings on U.S.-Iran Diplomacy, Saudi Supply and Rebounding Middle East Exports

Oil prices remained volatile as geopolitical risk and supply developments pulled the market in opposite directions. Brent crude rose 0.92% to $105.28 per barrel and then climbed another 1.92% to $107.30, while WTI traded around $92.05 in early Asian dealings before easing back toward $91.10 during European hours.

The earlier rise was linked to stalled U.S.-Iran diplomacy and skepticism that the Strait of Hormuz would reopen quickly, while later price pressure came from a Saudi pipeline restart, a U.S. offer of sanctions relief to Iran and a rebound in September exports from key Middle East producers. Longer-dated pricing also moved higher, with the December 2027 Brent contract closing at a record $80.29 before rising again to $80.67, showing that elevated energy prices were being reflected further out on the curve.

Currencies

Dollar Holds Firm as Yield Support Lifts USD/JPY and USD/CHF

The U.S. dollar remained supported by higher Treasury yields and firmer Federal Reserve expectations. The Dollar Index traded around 101.20, USD/JPY rose to about 157.40 during Asian trading and USD/CHF extended its advance to 0.8327, a fresh 16-month high.

The yen’s weakness kept intervention risks in focus, while the Swiss franc came under pressure as the dollar strengthened against major peers. Across currency markets, elevated oil prices and the associated repricing in global rate expectations remained a central driver of dollar demand.