Bond Market Debacle, Xi-Trump Summit, and More Central Bank Policy Decisions
September 24, 2026
With Japanese markets opening for their first session of this week, sharp rises occurred today in ten-year sovereign debt yields around the Pacific Rim, amounting to 15 basis points in New Zealand, 13 basis points in Australia, 11 basis points in Japan, 8 basis points in Singapore and 7 bps in South Korea. That set the tone for continuing upward drift in Europe of three basis points in the U.K. and France and two basis points in Switzerland, Italy, Spain and Germany. The 10-year U.S. Treasury yield overnight rose 3 basis points.
The extent of the stalemate between U.S. and Iran over the Strait of Hormuz was underscored by the unabated flow of shipping traffic there and the insulting language yesterday in U.N. speeches by the presidents of the two countries. The Brent and West Texas Intermediate prices of crude oil climbed overnight by 2.5% and 2.2%, respectively. Gold, silver and bitcoin prices in turn dropped by 0.4%, 1.2% and 1.1%. Outside of a 0.4% appreciation against the Korean won and 0.3% versus the Swiss franc, net action in the dollar varied from zero percent to 0.1% against major rivals. The yen is currently hovering around its overnight low of 158.46/USD, while the euro has bounced marginally above its floor of $1.1369.
U.S. stock market futures are in the red, led by a 1.1% drop in the Nasdaq. Investors await the release later this morning of the U.S. current account deficit’s size during the second quarter, monthly new home sales, the K.C. Fed’s survey of regional manufacturing, weekly jobless insurance claims and most especially and possible early news from the summit talks between Presidents Xi of China and Trump of the United States. The talks will wind up tomorrow. Other stock market movements this Thursday include drops of 1.7% in India, 1.2% in China and Indonesia, 0.8% so far in Germany and France, but also upturns of 0.9% in South Korea and 0.8% in Japan.
Interest rate decisions announced by central banks in Sweden (no change), Switzerland (no change) and Norway (+25 basis points) were each aligned with market expectations.
Although officials at the Swedish Riksbank left their interest rate at 1.75%, the observed level for the past twelve months, forward guidance was tweaked in a hawkish direction. Excluding the temporary depressant of some fiscal steps, core inflation is expected to rise above 2.0% in the short term, and the released statement implies one or two rate hikes being made fairly soon.
The Executive Board considers that the combination of stronger economic activity and continued supply shocks means that the policy rate should be raised more than projected in the June forecast to stabilize inflation around 2 per cent. In addition to the war in the Middle East, there are also other risks that could, individually or jointly, affect the outlook for inflation and economic activity. If there were to be signs of a larger and more persistent upturn in inflation, the Riksbank would raise the policy rate at a faster pace than in the current forecast.
No central bank over the past half century has done a better job than the Swiss National Bank of delivering persistently low and stable inflation. It does this with just four scheduled policy reviews a year, which is fewer than the global norm. The SNB policy rate has been at zero percent since a 25-basis point cut in June 2025 and is being kept at that level. While expected to climb to 1.2% during the next two quarters, the revised forecast of consumer price inflation thereafter hovers between 0.7% and 0.9% through the rest of the forecast horizon to mid-2029. Officials perennially worry about their currency becoming too overvalued, which could risk deflation, and reiterated that “the SNB is willing to be active in the foreign exchange market as necessary to ensure appropriate monetary conditions.”
At the Bank of Norway, the policy rate was raised by 25 basis points in follow-up to a similar hike done earlier this year in May. The new 4.5% rate level returns as a result to the peak maintained from December 2023 until June 2025. Back in June, monetary officials had given a heads up that a rate hike might be needed by end-summer. Today’s statement of explanation clarifies,
Inflation has been above target for several years. By raising the policy rate, we are helping to reduce inflation. It will likely be necessary to keep the policy rate elevated for a time, and the Committee is prepared to raise the policy rate further if needed to bring inflation down to the 2% target within a reasonable time horizon.
Japan’s belatedly released September purchasing managers surveys revealed positive but slower-than-expected economic activity this month. The composite reading of 52.5 was at a 4-month low. The manufacturing and service sector scores of 54.1 and 51.6 represent 7- and 2-month lows.
In a mixed Australian labor market report for August, unemployment unexpectedly climbed to a 57-month high of 4.6%, but jobs growth (+39.5 thousand) and labor force participation of 67.1% surpassed analyst forecasts.
French consumer sentiment in September of 86 remained well below the long-term mean of 100 but printed at a 4-month high for the third month in a row and beat expectations. Business confidence, in contrast, fell to a 3-month low mainly as a result of significant deterioration in the retail sector.
The German IFO Institute’s monthly business survey in September yielded the highest overall business climate index in 40 months (89.5 versus 88.8 in August and as low as 84.2 in November 2024). The result further confirms a surprising resilience given the elevation of energy costs and long-term interest rates and prevalence of unresolved geopolitical tensions. Sub-indices for current conditions and future expectations set 34- and 10-month highs.
The CBI British distributive trades index became even more negative in September, with a reading of -55 after -48 in August and -26 in July.
Czech business confidence fell to a 9-month low, while Czech consumer sentiment improved to a 2-month high.
Brazilian consumer confidence softened to a 19-month low in September.
Spanish producer price inflation accelerated in August to a 44-month high of 13.2% from 9.7% in July and -6.9% in February just before the outbreak of the war in Iran. Finnish PPI inflation in August rose 0.4 percentage points and, at 7.3%, was very close to May’s 39-month peak of 7.4%.
Last quarter’s U.S. current account deficit of 246 billion was not quite as large as predicted but still almost 11% wider than the gap in the first quarter. As a percent of GDP, the first half deficit equaled 2.9%, down from 3.6% in 2025 and 4.0% in 2o24.
New U.S. jobless insurance claims last week of 197k stayed below 200k for a second straight week and was the lowest total in nine weeks. Neither this nor the smaller-than-predicted current account imbalance helped lift U.S. share prices, but the 10-year Treasury yield settled back a basis point.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Norway, French business and consumer confidence, German business climate index IFO, Japanese purchasing manager surveys, Swedish Riksbank, Swiss National Bank, U.S. current account deficit
ShareThis
