A signal, not a fix: Treasury doubles long-end buybacks, Iran whipsaws between deal and D-Day

EU Mid-Market Update: A signal, not a fix: Treasury doubles long-end buybacks; Iran whipsaws between deal and D-Day; Awaiting Walmart and Alibaba results; Crypto goes crazy.

Notes/observations

-Long end is the market, and Treasury just intervened in it. Single principal thread overnight is the US Treasury's decision to at least double the size of its liquidity-support buyback operations in the 10–30-year nominal sectors, to a minimum of $4B per operation from 9 Sept. Read-through was immediate and global: JGBs rallied hard across the curve with the steepest yield declines at the very long end. Gilts and Bunds opened firmer in sympathy. US dollar slid to a three-month low, equity duration proxies, Asian tech, Nasdaq futures, rallied, and bitcoin pushed to an eleven-week high, helped separately by Trump's push for crypto legislation. The skepticism is well-founded, however: this is a plumbing measure, not quantitative easing, and it changes neither net borrowing nor the structural pressures on the long end. Pressures were underlined by US national debt crossing the $40T mark, by heavy corporate issuance, and by oil-linked inflation risk. Japan supplied its own cautionary note: foreign investors dumped medium-term notes at the fastest pace since 2006, and the 20-year auction, despite aggressive pre-auction buying, cleared with a badly widened tail. July FOMC minutes, meanwhile, showed most participants favoring a hold with several preferring a hike and inflation risks skewed higher.

-EU data flow was firm almost everywhere, and it argues against the dovish market pricing. Riksbank held for a seventh consecutive meeting, as expected, retaining explicit optionality to hike later this year but pointedly declining to sharpen that signal, enough of a non-event to knock the krona modestly lower against the euro. Critically, the Riksbank named Middle East supply disruption as a live upside inflation risk, alongside stretched US tech valuations, fiscal sustainability and unpredictable US trade policy. German PPI beat expectations clearly on both the monthly and annual measures, though the monthly gain was flat excluding energy, pass-through rather than broad-based pressure. Danish growth decelerated sharply from a very strong prior quarter, Dutch unemployment edged up, and the Swiss trade surplus hit a record on a strong export rebound. In Asia the tone was better than feared: Japanese exports rose for an eleventh straight month at the fastest pace since 2022, with shipments to China, the US and Asia all accelerating well past consensus, offsetting the weak preliminary Q2 GDP print. Taiwanese export orders beat sharply on the AI cycle, though European orders decelerated markedly. Australian employment fell against expectations of a solid gain and unemployment ticked above consensus, validating an extended RBA pause; the PBOC left both LPR tenors unchanged for a fourteenth straight month.

- Trump declared the MOU with Tehran dead and announced sweeping secondary-sanction threats against any jurisdiction providing Iran a financial or logistical lifeline, following the UAE's suspension of all trade with Iran; Araghchi dismissed it as a diversion. More concerning than the rhetoric: reports that Trump has briefed his team on intensive strikes should economic pressure fail, and on an alleged Iranian plot against shipping. Hormuz transits remain roughly half pre-war levels despite covert US escorting, keeping a persistent risk premium in European gas and refining margins and a live earnings drag for Middle East-exposed industrials.

- Crypto is soaring because of three factors: the Treasury doubling its long-end bond buybacks to $4B per operation and dragging yields down from 2007 highs, the SEC proposing its first dedicated crypto registration framework, and Trump meeting crypto execs at the White House to push the CLARITY Act. It's rising this hard because the market was heavily short into all three, over $1B in shorts liquidated inside an hour.

-Asia closed higher with KOSPI outperforming +5.9%. EU indices -0.6% to +0.3%. US futures -0.2%. Gold -0.8%, DXY -0.1%; Commodity: Brent +2.3%, WTI +2.4%; Crypto: BTC +11.3%, ETH +18.9%.

Asia

- Australia July Employment Change: -15.8K v +12.0Ke; Unemployment Rate: 4.5% v 4.4%e; Full time employment still rising; upward back month revision).

- Australia Aug Consumer Inflation Expectation: 4.9% v 4.7% prior.

- China Central Bank (PBOC) left the 1-Year and 5-Year LPR Rate unchanged at 3.00% and 3.50% respectively (as expected).

- Japan July Trade Balance: -¥643.5B v -¥649.0Be (3rd straight deficit); Exports Y/Y: 23.2% v 20.1`%e (driven by strong global demand for electrical machinery, transport equipment, and semiconductors); Imports Y/Y: 27.8% v 25.1%e (imports primarily due to higher energy costs and elevated commodity prices).

- Japan sold 20-year JGB Bonds; Avg Yield: 3.6980% v 3.6260% prior; bid-to-cover: 3,98x v 4.52x prior
­ North Korea's Kim Yo Jong (sister of Kim Jong Un) noted that relationship between Trump and Leader Kim was truly excellent; Not aware of any recent contact between Trump and Kim. The nature of US-South Korea joint military drills did not change despite the reduced scale.

Taiwan

- Taiwan Government approved 2027 defense spending NT$1.1T [the proposed overall budget was NT$3.6T].

Global conflict/tensions

- President Trump posted on Truth Social pledging economic Warfare and Isolation on an unprecedented scale" against Iran (no specific details provided).

- Iran govt stressed that no frozen Iranian funds had been released yet under the MOU with US.

Americas

- FOMC July Minutes saw most participants favored holding rates steady, though several preferred a hike, with inflation risks judged skewed to the upside and higher rates likely needed if inflation fails to ease.

- US Treasury announcement of increasing, by at least double, the size of liquidity support buyback operations for longer-dated nominal coupon securities (the 10-year to 20-year sector and the 20-year to 30-year sector; effective Sept 9th. The current maximum size of $2 billion per operation will be at least $4 billion per operation. (**Insight: Historically such announcements usually reserved for the quarterly refunding announcements with the prior announcement made on August 5th).

Trade

- Reports that US-Canada trade agreement would include lowering the US tariff on Canadian auto imports from 25% to 15% (**Note: matching those on Japan and Korea).

Energy

- Strait of Hormuz shipping traffic said to show no uptick. Reports that commodity vessel transits at Hormuz totaled 9M on Wed (**Note: Press reports noted that US Navy using “stealth” operations to escort tankers through the Strait of Hormuz. US officials estimating 10M barrels per day is being shepherded through vs around 20M bpd pre-war).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.20% at 10,722.11, DAX -0.58% at 25,977.70, CAC-40 -0.10% at 8,493.41, IBEX-35 +0.34% at 19,915.05, FTSE MIB +0.36% at 52,807.00, SMI -0.13% at 14,367.80, S&P 500 Futures -0.05%].

Market Focal Points/Key Themes: European equities remained pinned at their lowest levels since August 3, the Stoxx Europe 600 barely changed and the DAX off 0.3% while the CAC 40 and FTSE 100 stayed flat, as hawkish Federal Reserve July minutes extinguished any rebound by revealing deep concern over sticky inflation and an explicit readiness to hike rates further if prices stay above the 2% target—directly undercutting recent bets on an autumn pause and amplifying ECB warnings that near-3% Eurozone inflation remains unacceptable amid secondary energy-shock risks. The minutes arrived hard on the heels of a violent global bond selloff ignited by escalating Middle East war rhetoric and Brent’s surge past $91, which had driven 10-year Bund yields to a 2011 high of 3.22% and the U.S. 30-year Treasury to a 19-year peak of 5.337%, compressing equity risk premia until the Treasury intervened by doubling its long-dated nominal buyback cap from $2 billion to at least $4 billion per operation. Persistent commercial traffic collapse through the Strait of Hormuz—where the majority of shipowners continue to avoid the chokepoint amid acute Iran-related security uncertainty—kept tanker flows well below historical averages and Brent elevated, embedding cost-push inflation risks that leave European stocks exposed to further stagflationary pressure. Stock-level divergence cut through the malaise: Arcadis rose 2% after WSP Global confirmed it was pursuing a takeover, Novonesis jumped 9% on a second-quarter revenue beat, while Aegon sank nearly 4% following underwhelming first-half results.

Equities

- Consumer discretionary: JD Sports Fashion [JD.UK] –12.0% (FY26/27 adjusted PBT guidance cut to £700–800m from £750–850m, versus ~£781m analyst consensus; Q2 LFL sales –3.1% with North America –6.8%, reflecting weaker consumer demand and footwear/product-cycle pressure), Ubisoft [UBI.FR] –2.5% (meaningful underperformance with no sufficiently specific fresh company/broker catalyst identified in the morning scan), Kinepolis [KIN.BE] +2.5% (open +2.0% → now +2.5%; [L━━●━━━H]; H1 results released this morning, with the shares holding their opening gain rather than fading; today is the scheduled H1 results/analyst-meeting date).

- Financials: Aegon [AGN.NL] –3.0% (operating capital generation €416m actually beat ~€376m consensus and the H2 buyback was increased, but investors are selling the unexpected CFO transition/management uncertainty rather than the underlying operating numbers).

- Healthcare: Valneva [VLA.FR] +7.0% (open +2.5% → now +7.0%; [L━━━━●━H]; likely vaccine/biotech sympathy after Moderna’s Merck-partnered phase-3 melanoma vaccine succeeded and triggered an unusually broad mRNA/cancer-vaccine rally; no new Valneva-specific release found this morning), Sartorius Stedim Biotech [DIM.FR] +5.0% (open +2.0% → now +5.0%; [L━━━●━━H]; UBS upgraded the shares back to Buy, producing a clear broker-driven rerating).

- Industrials: Stellantis [STLA.IT] +2.0% (European autos are the strongest major STOXX industry group this morning; no fresh Stellantis-specific catalyst emerged from the overnight U.S./Asia or morning broker check), SSAB [SSABA.SE] –4.5% ([L●━━━━━H]; selling has carried the stock to the session low; no clear fresh SSAB-specific announcement or broker action identified, and the strength in ArcelorMittal argues against calling this a simple Europe-wide steel move).

- Technology: SAP [SAP.DE] –2.0% (large-cap German underperformer while the broader STOXX 600 is roughly flat; no fresh SAP-specific company catalyst identified in the overnight U.S./Asia or morning broker cross-check).

Speakers

- Sweden Central Bank Policy Statement reiterated stance that probability remained that the Key Rate to be raised in 2026. Risk of underlying inflation becoming too high in wake of supply disruptions in Middle East remains.

- Iran Foreign Min Araghchi noted that the economic D-Day was a diversion from US crisis; US policies would bring defeat and enmity

- Trump informed his team of the possibility of launching intensive attacks on Iran if economic pressure failed; Said to see chances of reaching an agreement with Iran becoming slim; Administration briefed on reports of an Iranian plot to resume attacks on ships.

Currencies

- Surging global bond yields and higher government borrowing costs were reigniting concerns over debt sustainability in major economies (**Note: US National Debt moved beyond the $40 Trillion level. Treasury on Wed announced a The “mini-QE” program that calmed the situation for now.

- USD began the session consolidating its losses following Wed Treasury QE announcement. Greenback softening a bit more as the session progressed.

- EUR/USD probing the 1.17 area. Dealers noted that the 1.20 level was back in play.

- GBP/USD at 1.3625 by mid-session.

- USD/JPY lower at 158.45 as US Treasury.

- The 10-year German Bund yield last at 3.26%, France 10-year Oat at 4.11% and 10-year Gilt yield at 5.06%; 10-year Treasury yield: 4.67%; 10-year JGB: 2.84%.

Economic data

- (NL) Netherlands July Unemployment Rate: 4.0% v 3.8% prior.

- (DE) Germany July PPI M/M: 1.1% v 0.6%e; Y/Y: 3.0% v 2.5%e.

- (CH) Swiss Jun Trade Balance (CHF): 8.7B v 5.2B prior; Real Exports M/M: +10.7% v -5.9% prior; Real Imports M/M: -2.8% v -1.3% prior; Watch Exports Y/Y: 9.6 v 11.2% prior.

- (DK) Denmark Q2 Preliminary GDP Q/Q: 0.3% v 1.5% prior; Y/Y: 4.6% v 6.1% prior.

- (SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 1.75%; as expected.

- (PL) Poland July Sold Industrial Output M/M: -1.8% v -2.0%e; Y/Y: 5.1% v 5.0%e; Construction Output Y/Y: -2.4% v +4.2%e.

- (PL) Poland July Employment M/M: 0.1% v 0.0%e; Y/Y: -0.8% v -0.9%e.

- (PL) Poland July Average Gross Wages M/M: 1.1% v 0.6%e; Y/Y: 6.8% v 6.1%e.

- (PL) Poland July PPI M/M: 0.6% v 0.2%e; Y/Y: 2.8% v 2.5%e.

- (TW) Taiwan July Export Orders Y/Y: 61.9% v 52.7%e.

- (TW) Taiwan Q2 Current Account Balance: $58.5B v $62.5B prior.

- (HK) Hong Kong July Unemployment Rate: 3.7% v 3.7%e.

- (HK) Hong Kong July CPI Composite Y/Y: 1.7% v 1.7%e.

- (EU) Euro Zone Jun Construction Output M/M: -1.3% v +0.2% prior; Y/Y: -0.7% v +0.7% prior.

Fixed Income Issuance

- (FR) France Debt Agency (AFT) sold total €12.5B vs. €10.5-12.5B indicated range in 2029, 2031, 2032 and 2034 Bonds.

- (SE) Sweden sold total SEK750M vs. SEK750M indicated in 2036 and 2039 I/L Bonds.

Looking ahead

- (MX) Mexico CitiBanamex Survey of Economists.

- (AR) Argentina Aug Consumer Confidence: No est v 40.7 prior.

- (EG) Egypt Central Bank (NBE) Interest Rate Decision: Expected to leave Deposit Rate unchanged at 19.00%. No consensus for Lending Rate (currently at 20.00%).

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.0-1.5B in inflation-linked 2032, 2043 and 2047 bonds (Oatei).

- 06:00 (UK) Aug CBI Trends Total Orders: -40e v -45 prior; Selling Prices: 14e v 11 prior.

- 06:30 (TR) Turkey to sell bonds.

- 07:00 (CA) Canada Aug CFIB Business Barometer: No est v 58.3 prior.

- 07:30 (IN) India July Core Industries Output Y/Y: No est v 5.0% prior.

- 08:00 (BR) Brazil CONAB Aug Sugar Production.

- 08:00 (UK) Daily Baltic Dry Bulk Index- 08:30 (US) Aug Philadelphia Fed Business Outlook: 25.0e v 41.4 prior.

- 08:30 (US) Initial Jobless Claims: 211Ke v 200K prior; Continuing Claims: 1.79Me v 1.777M prior.

- 08:30 (CA) Canada July Industrial Product Price M/M: -0.5%e v -1.4% prior; Raw Materials Price Index M/M: -2.0%e v -6.9% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 14th: No est v $740.0B prior.

- (EG) Egypt Central Bank (CBE) Interest Rate Decision.

- 10:00 (US) July Leading Index: +0.1%e v -0.2% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (MX) Mexico Central Bank (Banxico) Aug Minutes.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:00 (US) Treasury to sell 30-Year TIPS Reopening.

- 15:00 (AR) Argentina Jun Economic Activity Index (Monthly GDP) M/M: +0.3%e v -0.5% prior; Y/Y: 2.4%e v 0.2% prior.

- 15:00 (AR) Argentina July Trade Balance: No est v $2.2B prior.

- 15:00 (AR) Argentina Jun Wages M/M: No est v 2.2% prior.

- 15:30 (NL) ECB’s Sleijpen (Netherlands).

- 17:00 (KR) South Korea July PPI Y/Y: No est v 8.6% prior.

- 18:45 (NZ) New Zealand July Trade Balance (NZD): No est v 0.0B prior; Exports: No est v 8.1B prior; Imports: No est v 8.1B prior.

- 19:00 (AU) Australia Aug Preliminary Manufacturing PMI: No est v 52.0 prior; Services PMI: No est v 53.6 prior; Composite PMI: No est v 53.2 prior.

- 19:01 (UK) Aug GfK Consumer Confidence: No est v -17 prior.

- 19:30 (JP) Japan July National CPI Y/Y: 1.9%e v 1.7% prior; CPI (ex-fresh food) Y/Y: 1.8%e v 1.6% prior; CPI (ex-fresh food/energy) Y/Y: 1.9%e v 1.7% prior.

- 20:00 (KR) South Korea Aug Imports 20 Days Y/Y: No est v 20.0% prior; Exports 20 Days Y/Y: No est v 52.3% prior.

- 20:30 (JP) Japan Aug Preliminary Manufacturing PMI: No est v 54.5 prior; Services PMI: No est v 51.2 prior; Composite PMI: No est v 52.7 prior.

- 22:35 (CN) China to sell 2-year, 5-year and 10-year Additional Bonds.

- 23:00 (ID) Indonesia Q2 Current Account Balance: -$11.7Be v -$4.0B prior.

- 23:30 (JP) Japan to sell 3-Month Bills.