Global Rates

The three-way divergence we described on Friday narrowed today, and it narrowed from the American end. Polymarket now prices a 25bp ECB increase on September 10 at 94.5c and a 25bp Bank of Japan increase on September 18 at 87.5c, both verified at source in this session and both higher than Friday's 92c and 84.5c. The Fed's September meeting is priced at 32.5c for a hike against 27.5c on Friday, with no change at 66.5c. Three developed-market central banks, one oil shock, and the gap between the two that are certainly moving and the one that might has closed by five points in a weekend. What closed it was not oil and not a central banker. It was trade. US-Canada negotiations collapsed late Friday night, with Washington imposing 50% tariffs on roughly $20bn of Canadian goods under Section 338 and Prime Minister Carney committing to dollar-for-dollar retaliation from September 8 across steel, dairy, appliances, agricultural equipment, pulp, paper and electronics. Carney's account is that the United States introduced late demands touching Canada's other trading relationships, its auto sector and protections for Canadian culture and the French language. For a rates book the mechanism is straightforward: a North American trade war is an inflation impulse, and the market added six points to Fed-hike-in-2026, taking it to 55.5c. Long ends did not confirm it. The US 10-year fell 3.8bp to 4.70% and the 30-year 4.7bp to 5.229%, both tracking crude rather than tariffs, because Treasury Secretary Bessent spent the day unveiling what he pre-announced as an economic D-Day sanctions package against Iran and the oil market read sanctions as the substitute for escalation rather than the prelude to it. Brent is $92.41, down 2.1%; WTI is $84.80, down 2.6%. Iran has responded by warning of ship seizures in the Strait of Hormuz and the rial is at a record low, so the risk is not gone, it is merely not today's price. Elsewhere the repricing continues without needing American help. The German 10-year Bund is 3.2502%, up fractionally and still near its highest since 2011. The 10-year JGB is 2.90%, up 1.9bp overnight and back in territory it last occupied in 1996, lifted by exactly the same September BoJ hike now priced at 87.5c. The 10-year gilt is 5.0527%, slightly lower on the day but above 5%. That is four sovereign long ends at or near multi-year and in one case multi-decade highs, which is the structural case for our only global-facing position and the reason a US buyback programme that expires on November 4 was never going to settle it. On pos-017, our bet that the US 10-year touches 4.80% before 2027, fair value moves from 70 to 72. We want to be precise about the character of that move because the last two sessions have not been: the yield fell, the barrier is now 10.0bp instead of 10.9bp, 93 sessions remain at about 4bp of daily vol for sigma of 38.6bp, and the same formula with the same haircut returns 72. It is arithmetic. After a 74-to-60 cut and a 60-to-70 reversal in consecutive sessions, a two-point mechanical adjustment is the whole of the improvement we are claiming. The market is 67 mid, 64 bid / 70 ask, the position is +$76.52 on a $25 stake, and the take-profit gate stays where we lowered it, at a 66c bid, two points away. The BoJ September hike we flagged at 40c on August 3 and declined to chase at 42.5c on August 10 now trades at 87.5c. It stays retired as a completed miss and the number keeps getting worse in public, which is the point of publishing it. No trades today. Book: 5 open, $332 staked, +$100.63 unrealized, +$611.08 realized, 11/14.