A new neutral rate, much like a decades-old one
TLT•Global markets were mixed as oil and yields rose, with Brent up about 2% after President Donald Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz. Markets priced a 66% chance of a Federal Reserve rate hike in October and 90 basis points of total tightening ahead.
1. Oil and markets
Asian markets were mixed, oil and yields rose, gold fell and the dollar was flat. Brent climbed about 2% after Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz. Kpler estimated crude exports from key Middle East producers rebounded to 12.8 million barrels per day in September, their highest level since the war started.
2. Rates and growth
Brent has closed above $100 for three consecutive weeks and was up 17% for September so far. Diesel prices were at record highs, with the crack spread around $75 against a historical average of $15. Markets priced a 66% chance of a Fed hike in October and 90 basis points of total tightening ahead, while the Atlanta Fed GDPNow estimate put third-quarter growth at 5.0%. The 30-year Treasury yield rose 25 basis points in September, with most of the increase in the term premium.
