US 5-Year Yields Hit Highest Since 2007

• US activity surprised sharply higher, with composite PMI jumping to 58.4 vs 55.3 expected. Combined with a weak 5-year Treasury auction, the 5-year yield broke 5% for the first time since 2007, driving a broad bond sell-off.
• Markets lifted the probability of an October Fed hike to around 70%, while Fed speaker Michael Barr said further tightening may be needed to return inflation to 2%. The repricing pushed yields higher across the curve.
• US-Iran tensions again pressured energy markets, with Iran setting firm conditions before talks resume. Brent climbed above US$103/bbl, while potential US diesel export restriction rumours added to supply concerns.
• Australia’s August labour report is the key local release, with +20k employment expected and unemployment at 4.4–4.5%. Markets continue to price a ~90% chance of an RBA hike next week.
• President Trump hosts Xi Jinping today, with markets focused on whether the current US-China trade truce is extended.