00:00Another week where in September this has become quite the dominant conversation, hasn't it?
00:04Taking its lead, of course, from higher oil prices once again, that pushes yields higher.
00:08I mean, we seem to be focused on the inflation story, but increasingly talking about the growth story as well.
00:16What are you watching out for in the bond narrative?
00:18Yeah, I think, I mean, obviously the rise in oil prices today is very much the dominant factor,
00:22and that will keep upward pressure on yields.
00:24I mean, we saw last week that run of losses in crude markets,
00:27which kind of predicated on this hope that we would get some kind of deal between the U.S. and
00:31Iran,
00:31and clearly the weekend reports have poured cold water over that.
00:35So that's going to keep upside pressure on energy as well as, you know, it's not just oil,
00:39it's products further down the barrel as well.
00:41I think obviously, you know, none of us are geopolitical strategists,
00:44but I think from a market vantage point, you are hoping for some sort of progress.
00:48You're not. You've got stalemates.
00:49And if you look at the comments from Trump, you know, he's talking up, you know, economic, you know, pressure
00:53on Iran,
00:54that suggests a prolongation of that stalemate.
00:57And another thing the market had been hoping for was, you know, some sort of reprieve for the midterms.
01:01This pours cold water over that.
01:03But then we've also seen reporting that, you know, Trump could resume, you know, attacks on Iran after the midterms.
01:08So oil needs to retain that escalation premium.
01:10That will keep upward pressure on yields.
01:12We have PCE on deck this week.
01:14Yes, it could come a bit soft, particularly given some of the annual revisions,
01:17but it feels like any dips in yields should be shallow and temporary.
01:20OK, so oil up, bonds down, yields up.
01:23You're close to five, not far off 5% on the two year, at 5.2 on the 10 year.
01:29How much of a headwind is that?
01:30When does that become a headwind for U.S. stocks?
01:32Yeah, I mean, that is the question at the moment.
01:34U.S. stocks are a little bit soft today, but I'm still pretty constructive.
01:37I mean, obviously, you know, rates are the dominant question.
01:39But if you look at the nature of the increase in rates, a lot of it's real rates and it's
01:43driven by strong economic activity.
01:45You know, we saw the PMIs last week.
01:47If you want to use those as an indicator, U.S. economic activity is particularly strong.
01:51So until that changes, then, you know, I don't think rates can be a material headwind.
01:55But also, you know, rates, they become a material headwind in the sense that they tighten financial conditions.
02:00But if you look on the terminal, the Bloomberg, you know, financial conditions index for the U.S.,
02:06we're looser than the one in the five-year averages.
02:08So we're not at that point where we can really start pricing it.
02:11And then for U.S. stocks as well, you've got to consider, yes, there's economic exceptionalism, but there's also tech
02:15exceptionalism.
02:16We saw that on display last week.
02:18We saw the chip makers were particularly strong.
02:20We saw Meta leading on agentic AI.
02:23And also, we've got Micron reporting this week.
02:25So you could potentially see a further extension of that at a time where, you know, we're heading into Q4,
02:30which is seasonally strong for the U.S., and an earnings season where profit estimates are robust.
02:35Guild's open in nine minutes.
02:36What's more important to what happens next in the gilt market?
02:38What happens in Merseyside, on Merseyside, or in the Gulf?
02:41In the Gulf, definitely.
02:42OK.
02:43I think, you know...
02:43We can ignore Liverpool.
02:44I wouldn't say ignore it, but, you know, there will be a lot of political noise that we'll see throughout
02:47the week.
02:48I just don't think it particularly matters.
02:49We're going to see Healy be disciplined.
02:51You know, he wants to keep a low profile at the event.
02:54We saw, you know, weekend reporting suggesting that Burnham could have this really expensive social care package.
02:59But, at the end of the day, that's going to be earmarked for 2029, subject to electoral approval.
03:05If you're guilty, that's pretty hard to price right now.
03:08Instead, you're focusing on what's going on in the oil market.
03:10Adam, great to see you.
03:11Thank you very much indeed.
03:11You want to follow Adam and the rest of the team?
03:13MLIV Go, on your Blumeau terminal, is the function.
03:16MLIV Go, on your Blumeau terminal, is the function.
