10-year yield above 5.1% on strong PMI, oil rises over Iran

The US economy is showing surprising strength: the purchasing managers’ indices for September reached five-year highs, forcing the markets to price in a new rate hike. As a result, the US ten-year yield broke through 5.1% for the first time since 2007. At the same time, the oil market is rising on geopolitical tension around Iran, while Bitcoin is losing ground but finding support in continued inflows into spot ETFs.

In brief:

• The US ten-year yield rises above 5.1% after strong PMI figures and hawkish remarks from a Fed official
• Brent oil climbs 3% to $98.31 a barrel as talks between the US and Iran stall
• Bitcoin falls to $84.000, but spot ETFs still saw $715 million in inflows on 22 September

Strong economic picture pushes rates to highest level since 2007

The Markit purchasing managers’ indices for the US came in sharply higher than expected in September. The index for manufacturing rose to 57.0 and the one for services to 58.7, both five-year highs. The figures point to annualised economic growth of around 5%, which gives the market reason to take an October rate hike seriously.

After hawkish remarks by Fed governor Barr, the probability of a hike in October rises to around 70%. The yield on ten-year US Treasuries therefore climbs to above 5.1%, the highest level in almost twenty years. As a result, US equity funds have already seen four consecutive weeks of outflows.

Stalled Iran talks push oil price towards $100

On the geopolitical front, the situation around Iran is hardening. The Iranian president took a firm stance at the UN General Assembly, and indirect talks via Qatar produced no concessions. The US Treasury is imposing worldwide sanctions on Iranian airlines, which pushes the oil price up further. Brent oil rises 3% to $98.31 a barrel, approaching the $100 mark.

Meanwhile, the US and China are extending their temporary trade agreement by two months, until 10 January 2027. The underlying structural disputes, however, remain unresolved. The summit between the two countries on 24 September is seen as an important moment for risk sentiment in the markets.

Bitcoin falls to $84.000 but ETF inflows offer support

Rising interest rates are also putting pressure on the crypto market. Bitcoin drops to around $84.000, a fall of 2.8% in 24 hours. Ethereum trades at $2.687. Yet inflows into spot ETFs are holding up: on 22 September, $715 million flowed into Bitcoin ETFs and $162 million into Ethereum ETFs, which lends some support to prices.

SoSoValue also reports that the Trump administration is considering an initiative for a dollar stablecoin intended for use outside the US. In the tech sector, the focus is shifting from a scarcity of hardware to demonstrating returns on AI investments, with companies such as Google and Amazon drawing increased attention.