US equities were weaker Wednesday, S&P down 0.3%. US10yr yields are down 5bps to 3.9%. Another volatile session in gilts, 30yr rose to 5.1% at one point before pulling back, prompting BoE to step back in and purchase GBP4.4bn in bonds, the most extensive daily intervention during the emergency programme. 10yr gilts ultimately ended the session little changed.

US yields are slightly lower but do not necessarily assume that non-machine buyers will return because equity positions are down. This year’s lesson is that the threshold to attract” genuine” buyers is high in a world with extreme macro volatility and no QE.

Us stocks hit another fresh low ahead of CPI, but from here, I suspect broader markets(ex-UK) could consolidate as investors wait for the CPI catalyst to dictate the next leg in risk markets and the US dollar.

US PPI data from earlier in the morning showed growth topping forecasts, rising 0.4% from August and increasing for the first time in three months, as good news proved bad news. FOMC minutes also pointed to more restrictive policy at the meetings, but the debate about what comes next is unfolding.

There was nothing really shocking to see in the FOMC minutes. You can see the internal discussion in the Fed between not doing enough to combat inflation immediately and overtightening (especially in the context of global tightening), leading to more profound job losses. Discussion of the Fed needing to calibrate the pace at some point (obviously – cannot keep going 75bp forever).


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Overall, I’d say it was balanced, but still erring more on the side of doing more now to get inflation under control rather than worrying about going deeper into restrictive territory right now. They are still willing to make the trade-off in growth to bring inflation back to target.

But, at the end of the day, data will determine the pace for the next two meetings. Pricing for the next two meetings is 72.9bp, and 58.3bp, respectively (72.2bp and 59.1 before), and is relatively stable compared with the belly and back end of the curve. The price action there is more like a “buy the news, sell the fact” rather than any significant change in the Fed’s point of view.


On another hair-raising day, gilts rebounded sharply off early (LDN) afternoon lows after 30-year cash briefly revisited 5%. Still, it was a chaotic session, with the long end enduring a remarkable round trip.

One day is left of the buybacks, which promises plenty of fireworks. Little domestic data of note and supply is done for the week, so it will be interesting to see if Gilts can maintain the recovery.


Demand concerns at the forefront OPEC have turned more bearish on global GDP growth and revised their oil demand forecast lower. At the same time, this downgrade should not surprise, given the OPEC+ decision earlier this month to cut production by 2mb/d.

However, whenever there is any poor growth headline, it always triggers an adverse reaction in the oil markets. And with back-to-back-to back gloomy doom loop reads from China lockdowns to IMF growth down trades to OPEC demand downgrade ,it is challenging for traders to hold their nerve given the heightened cross-asset volatility, significantly so ahead of a potentially damaging for risk US CPI release.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT