Energy Crisis and Soaring Yields Dominate Week Ahead

The week ahead will be dominated by the energy crisis and soaring bond yields. The ongoing war between the US and Iran has led to elevated oil prices, which are putting strain on households and businesses across major economies.

Bond markets are being inundated with supply at a time when central banks are no longer active buyers, making them highly vulnerable to a debt crisis. The US 10-year Treasury yield has surpassed 5.3%, the highest since 2002, while UK, French, and other European yields have also surged.

The Federal Reserve's minutes of its September meeting may offer some direction on monetary policy. Most Fed officials see at least a further 25-bps hike by December, but the picture for 2027 is muddied. The ISM services PMI for September and Treasury auctions will also be watched.

The European Central Bank's hawkish tone since its September decision has been consistent with expectations of an October rate hike. However, with headline inflation in the euro area approaching 4.0%, a back-to-back hike cannot be ruled out.