Yields on major sovereign bonds rise amid higher term premiums, inflationary pressures, and fiscal concerns.
Key points
Eurozone inflation reaches its highest level in nearly three years
German retail sales fall sharply in July
Hostilities in the Strait of Hormuz intensify following an attack on two oil tankers
ISM data expected to confirm strength in U.S. manufacturing
For the rest of the day, the interbank exchange rate (Mexican pesos per U.S. dollar) could trade between $16.93 and $17.07 in the spot market
Markets begin September under the same pressure that characterized August, as concerns over inflation, fiscal imbalances, and the high supply of debt once again push long-term sovereign bond yields to multi-decade highs. Pressure remains this Tuesday: the 10-year Japanese government bond yield has risen above 3.0%, its highest level since 1996, while the 10-year U.S. Treasury yield has climbed to 4.78%, its highest level since January 2025, and the 30-year yield remains above 5%. Against this backdrop, U.S. futures are falling sharply, with the S&P 500 down 0.7% and the Nasdaq 100 down 1.3%, while Brent crude jumps 2.2% to $92.52 per barrel following the attack on two supertankers as they left the Strait of Hormuz.
Monitor
Bolsas / Exchanges
S&P 500
7,649
-0.70%
Nasdaq
29,132
-1.30%
Dow Jones
52,923
-0.60%
IPyC
65,480
0.10%
Monedas / FX (Foreign Exchange)
USD/MXN
16.9819
0.00%
EUR/MXN
19.6867
-0.20%
EUR/USD
1.1592
-0.20%
Índice DXY
99.61
0.20%
Tasas / Exchange Rates
Treasury 2 años
4.36
0.8 bp
Treasury 10 años
4.78
2.2 bp
TIIE 3 meses
6.58
2.0 bp
M Bono 10 años
9.3
-1.0 bp
Commodities / Commodity Markets
Petróleo (Brent)
92.52
2.20%
Oro
4,358
-2.00%
What you need to know about the economy and markets
In fixed income, the global bond sell-off intensified. The 10-year Treasury yield rose 3 basis points to 4.78%, its highest level since January 2025, while the 30-year yield remained above 5%. In Japan, the 10-year yield reached 3.0%, its highest level since 1996, while the 10-year UK gilt yield jumped 16 basis points to 5.22%. In Europe, the spread between French and German bonds widened amid growing political uncertainty.
Our Take
The synchronized rise in yields reflects a combination of inflationary pressures, elevated fiscal deficits, and higher term premiums, factors that could keep long-term rates structurally elevated. This environment limits the potential for gains in fixed income and increases the sensitivity of equity markets to further increases in yields.
Eurozone inflation accelerated in August. According to the preliminary estimate, the CPI increased 0.4% month over month, below the expected 0.6%. On an annual basis, inflation rose to 3.3%, from 2.9% in July, its highest level since September 2023. In contrast, core inflation eased by one-tenth to 2.4% year over year.
Our Tak
ration in core inflation suggests that domestic price pressures remain contained, limiting concerns about a broader acceleration and allowing the ECB to maintain a cautious stance.
German retail sales fell 3.4% month over month in July in real terms, after seasonal and calendar adjustments, their largest decline since July 2021. In nominal terms, sales decreased 1.7%, while on an annual basis real retail sales fell 2.5%, highlighting a loss of momentum in consumption.
Our Take
The decline was largely explained by sales at gas stations, which were partially affected by the end of the temporary fuel tax reduction implemented during May and June. This suggests that a significant portion of the decline was driven by temporary factors.
Two supertankers, the Sidr, operated by Saudi Arabia's Bahri, and the Senegal Prosperity, operated by South Korea's Sinokor, were hit by projectiles of unknown origin while leaving the Strait of Hormuz. Both vessels were sailing with their AIS transponders turned off. The incident comes after a renewed exchange of fire between the United States and Iran over the weekend, the first in nearly a month.
Our Take
The incident increases the risk of further disruptions to hydrocarbon traffic through the Strait of Hormuz, although it does not yet represent a significant interruption to flows. An escalation in attacks could add a geopolitical premium to oil prices and put upward pressure on global inflation expectations, particularly if it spreads to other vessels or transportation routes.
Later, at 8:00 a.m., the U.S. ISM Manufacturing Index for August will be released. Consensus expects a slight moderation in the indicator, which is expected to decline from 55.6 points in July to 55.2 points in August. Despite the expected decline, the index would remain in expansion territory, above the 50-point threshold.
Our Take
We expect a marginal moderation in manufacturing activity, without a significant change in the sector's dynamics. A reading near 55.2 points would maintain the signal of expansion and be consistent with a U.S. economy that continues to show some momentum.
Corporate News
Shein had a rocky debut in Hong Kong, falling as much as 10% in early trading before closing virtually unchanged. The IPO valued the company at just over $26 billion, well below the $100 billion valuation it reached at its peak.
eDreams shares plunged more than 12% after the company reported disappointing results for its first fiscal quarter. Net profit fell to just €200,000, from €13.6 million a year earlier, reflecting a significant deterioration from the same period in 2025.
MediaTek rose after a new investment agreement with Nvidia was confirmed, strengthening its outlook in the artificial intelligence chip business. The agreement raises the Taiwanese company's profile in a strategic sector and reinforces its position among the leading manufacturers involved in the development of AI infrastructure.
Novartis shares rose 5.6% after the company announced positive results from two late-stage clinical trials of its experimental pill for multiple sclerosis. The development strengthens the outlook for its innovation pipeline and adds to a series of favorable results across the pharmaceutical sector this summer.
The to-do list
Closely follow President Claudia Sheinbaum's Second State of the Union Address, which she will present to Congress today.
Monitor the global bond sell-off, particularly whether the 10-year Japanese government bond yield continues to rise.
Tonight, prepare chiles en nogada. It's the season, and it's worth taking advantage of it with pomegranate, parsley, and a rich, thick walnut sauce.
Spend 30 minutes doing squats and deadlifts at home or at the gym, one of the best workouts for strengthening your legs and core.
Remember that today marks another anniversary of the beginning of Banco de México's operations in 1925, founded days earlier by President Plutarco Elías Calles.
Quote of the day…
"He who learns and learns but never practices what he knows is like one who plows and plows but never plants."
— Plato
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Guillermo Quechol gquechol@kapital.com
Nahely Suasnavar nsuasnavara@kapital.com
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