Oil prices continued their upward trend as Asian bonds followed U.S. Treasuries lower, amid rising energy costs that intensified inflation concerns and strengthened market expectations for a Federal Reserve rate hike.
Brent crude rose 1.3% to around $107.05 per barrel, marking an over-18% gain this month. Traders are weighing risks to Middle East oil supply after a key Saudi pipeline remained shut down following the attack, pushing prices higher.
The rise in oil prices weighed on Asian bonds, with government debt prices in Australia, Japan, and New Zealand falling slightly. This mirrored the decline in U.S. Treasuries during New York trading hours, when the benchmark 10-year Treasury yield briefly dipped below the 5% mark—the lowest level since 2023. On Tuesday’s Asian session, the 10-year yield hovered near that level. Japanese bonds declined ahead of the auction of 20-year government bonds.
Last week’s surge in oil prices and stronger-than-expected U.S. inflation data heightened market anxiety ahead of Wednesday’s Fed rate decision, with traders now pricing in over a 90% chance of a rate increase. Fed officials are growing increasingly concerned about persistent inflation, with three policymakers voting against a rate hike at July’s meeting.
“Right now, continued rate declines appear to be the path of least resistance, driven by many underlying factors,” said Zack Griffith, head of investment-grade and macro strategy at research firm CreditSights. He noted that the 10-year Treasury yield could climb toward around 5.5%.
Grace Peters, global investment strategist at J.P. Morgan Private Bank, said: “If bond yields reach levels of 5% or 5.25%, I think we’ll start seeing some signs of market discomfort. A 5% move would have psychological impact.”
Chris Armstrong, strategist at Berenberg Bank, added: “Markets are already quite tense. If major players now say, ‘Wait, we need to slow down a bit,’ it will only heighten uncertainty.”
Plugin Case Examples
Gold: After briefly testing the 4,250 level overnight, gold resumed its V-shaped rebound. It has now reclaimed the 4,300 round level. Today, closely watch the key resistance zone at 4,320/4,335. If this area is successfully retested and held, look for buying opportunities on pullbacks.
(Gold 15-minute chart)
Nasdaq: Following overnight price action breaking into the yellow zone, the index strongly rebounded by more than 400 basis points. Our plugin’s yellow alert delivered a roughly 3x risk-reward ratio. If momentum continues to break through today, consider a light long position on pullbacks. Also monitor potential bounce after low-volume sweeps near 29,000.
(Nasdaq 15-minute chart)
Crude Oil: Prices gapped higher above 103. For intraday long positions, focus only on sustained breakout signals; trade cautiously with small positions. Meanwhile, closely follow developments in Iran-Gulf negotiations, watching for signs of a sharp downturn.
(Crude Oil 15-minute chart)
Key Financial Data and Events Today:
20:15 U.S. ADP Employment Change (week ending August 29), in thousands
20:15 U.S. Empire State Manufacturing Index for September
