Markets
- Markets took a calm start to the new trading week. We should probably label it wait-and-see indecisiveness before multiple event risk to potentially unravel later this week. US yields decline between 1.5 bps (2-y) and 4.2 bps (30-y). With the 30-y yield holding at 5.23% and last week’s multi-year top still (5.33%) still within reach, this hardly can be seen as a sign of relief. CNBC reporting that the US Treasury might be considering to use some cash reserves from the Treasury General Account at the Fed (TGA) ($935bn as of August 20) to fund buybacks of bonds with longer maturities could partially explain today’s (bull) flattening of the US yield curve. This strategy of course doesn’t fundamentally change the sustainability of US public finances but might give markets an indication on how the US Treasury intends to buy time. Aside from this fiscal narrative, markets continue to look out whether Fed Chair Warsh will be able to ‘clarify’ his commitment to deliver on the Fed’s price stability mandate when addressing the Jackson Hole Symposium on Friday. Whatever the impact of the TGA headlines, this of course doesn’t apply to European/German bond markets. German yields are changing between +2 bps (2-y) and -0.5 bps (30-y). A similar ‘defensive’ wait-and see narrative applies to the stabilization of the oil price (Brent $93+/b). The European reference gas contract (Dutch TTF) even doesn’t see any reason to wait the new set of US economic sanctions against Iran (and its trading partners; “the single greatest financial offensive ever marshalled against any adversary”). The TTF reference adds another €2+/MWh to touch €69, heading for the highest close since the start of the Iran conflict end February. It only cements market expectations for the ECB to continue a gradual path of tightening monetary conditions, starting with a next 25 bps step in September. US and European equity markets show a modest risk-off modus heading into this week’s event risks (EuroStoxx 50 -0.3%) with tech again underperforming (Nasdaq -0.6% at the open).
- Persistent higher energy prices ahead of the announcement of US sanctions against Iran, a risk-off sentiment and an (admittedly mild) bull flatting of the US yield curve give the dollar some breathing space after last week’s setback. EUR/USD holds below the 1.17 big figure (1.167). DXY is testing the 99.00 area. USD/JPY tries to regain the 159 level. Even so any ‘USD gains’ for now remain limited and technically negligeable.
News & Views
- The Czech composite confidence indicator decreased from 101.1 to 100.5 in August. The slight deterioration came on behalf of weaker consumer sentiment (102.3 from 105.6; lowest since August 2025) with business confidence stabilizing at 100.2. The deterioration was broad-based (overall economic situation over the next 12 months, current financial situation and planning to make major purchases) with only the share of households expecting an improvement in their financial situation over the next 12 months remaining at the level of July. On a sectoral level, business confidence increased only marginally in the industrial sector while decreasing in trade, in construction and slightly in selected services sectors.
- The Hungarian Finance Ministry today announced that it can’t reduce the budget deficit further this year due to the cost of drought and energy crisis over the Summer. They target a 7.5% budget deficit which would’ve been 8.3% of GDP without the post-election budget steps that’ve already been implemented. Government debt is expected to temporarily rise to 77.5% of GDP this year (from 74.6%). Debt will start falling from 2027 onwards, according to projections the government will publish in October.
 and 4.2 bps (30-y). With the 30-y yield holding at 5.23% and last week's multi-year top still (5.33%) still within reach, this hardly can be seen as a sign of relief.){kind=link}