Markets Reprice as Inflation Risks Re-Emerge

• Rising oil prices continue to reshape rate expectations, with Brent crude above US$90/bbl lifting inflation concerns and driving a fresh sell-off in global bonds. Markets have increased pricing for further tightening across the Fed, ECB, BoE, RBA and RBNZ.
• The US 10-year Treasury yield climbed to 4.63%, its highest since mid-May, as rising oil prices lifted inflation expectations. Markets now price a 68% chance of a Fed hike in September, despite an expected hold next week.
• UK labour market data sent a mixed signal, with employment rising 148,000 while wage growth eased to 2.9% y/y. The softer earnings backdrop may ease domestic inflation concerns, although gilt yields remain sensitive to greater flexibility and government borrowing expectations
• Geopolitical risks remain the dominant market driver, with little sign of de-escalation in the Middle East. The IEA has warned of growing supply risks, keeping markets alert to the prospect of further emergency reserve releases and oil potentially moving towards US$100/bbl.
• Today’s focus shifts to Australia’s Labour Force Survey, UK CPI, and the US 20-year Treasury auction. The releases will test whether inflation and labour-market resilience can justify the recent repricing toward tighter policy.