Kevin Warsh, who runs the US central bank, has spent two weeks warning that inflation is not coming down fast enough. On Thursday one of his own colleagues said the exact opposite in public.

Christopher Waller who sits on the Fed board and votes on interest rates said he would rather leave them where they are this month. Markets believed him. The dollar fell to a four-month low, and traders cut the odds of a September rate rise from about 60% to something close to 50-50.

Friday reversed these expectations. The official jobs report showed 162,000 new jobs in August against a forecast of 53,000, which was the best month since March, and the odds climbed back to 58%.

This report and the immediate change is the main story of this week. Not because of what it says, but because two other measurements of the same month say something quite different.

The Scoreboard

The board below is the week in nineteen numbers, and two of them stand out.

Oil moved further than anything else on the board, and it is the number to keep in mind while reading the rest of this letter. Fuel goes into making things, moving things and heating buildings. So when it climbs, prices climb behind it a few months later. That is why three central banks are now leaning towards higher interest rates at the same time.

The yen also went up. It has spent most of this year going the other way, through two interventions and a good deal of official worry, so a week of quiet strengthening is worth the notice.

The US equities finished the week where they began. Thursday’s rally and Friday’s fall cancelled out each other.

Europe had a worse week, and Tuesday was the worst day of it. Euro area inflation came in at 3.3%. German thirty-year borrowing costs reached their highest level since 2011. The Euro Stoxx 50, which tracks the fifty largest listed companies in the euro area, dropped to a one-month low and ended the week down 0.9%.

Asia fell even further. Japan’s ten-year government bond yield touched 3.00% on Tuesday, a level it last reached in 1996. The Nikkei lost 2.1% over the week and Korea’s main index 1.5%.

Those are three regions and a dozen numbers, all given equal space in a table. The chart below gives them the space they earned, and one of them takes up most of it.

The large green circle is Brent crude, the oil price most of the world quotes. It rose 7.6% to $96.40 a barrel after tensions in the Persian Gulf worsened again. US petrol should pass $4 a gallon this weekend.

Most of this letter comes back to that number. But why is that? Simply put: Energy costs feed into nearly every other price, which is why euro area inflation rose, why the European Central Bank is about to act, and why central bankers sounded more nervous this week than last month.

1. Three counts of one month

The government says American hiring got faster in August. Two other measurements disagree.

Let’s start with the official figure. The Bureau of Labor Statistics is the US government’s statistics office. On Friday morning it reported 162,000 new jobs for August, against a forecast of about 53,000 from a survey of bank economists.

It also revised July, which had shown a loss of 23,000 jobs, into a gain of 23,000. Unemployment stayed at 4.1%. Of those 162,000, private companies accounted for 127,000. The rest was government hiring. Now let’s look into the second count.

ADP is a payroll company. It handles wage administration for roughly a fifth of American private-sector workers, which means it can see how many people were actually on payrolls without asking anyone. Its August figure, published on Wednesday, was 38,000 new private jobs.

So what does that actually tell us? Two organisations counted the same weeks and landed 89,000 apart. Neither is inventing anything.

The third count is narrower but points the same way. Challenger, Gray & Christmas tracks layoffs that companies announce publicly. August brought 52,881 of them, against 33,429 in July, which signals a 58% rise in the month the official data says hiring sped up.

1.1 Why all three can be right at once.

The government’s headline number is seasonally adjusted. Some months always add jobs and some always lose them. Shops hire for Christmas. Schools stop paying staff over the summer. Seasonal work ends in August. So rather than publish the raw count, the statistics office compares each month against what that month normally does, and reports the difference. Without that step, the figures would swing wildly every year for reasons nobody needs to think about.

Now look at where August’s gains came from. Restaurants and bars added 59,000 jobs. Hotels and hospitality added 62,000. That happened in the month when summer work traditionally ends.

Taken at face value, that is a hiring boom in kitchens. Measured against the seasonal pattern, it more likely means employers cut fewer summer workers than expected — because they never took on the usual number in the first place.

The adjustment assumes companies hire and fire the way they always have. This year they have done far less of both. And every month that continues, the headline number rests on a shakier assumption.

None of this makes the report wrong. It makes it weaker evidence than 162,000 suggests, in a week when that one figure moved the entire bond market.

2. The Fed disagreed with itself in public

One governor wants to hold. The chairman has spent two weeks arguing the opposite. Both vote in eleven days.

Warsh gave his first speech as Fed chair last month at Jackson Hole, the annual conference where central bankers say the things they have avoided all year. His message: inflation is not improving, and money is still too cheap. Markets heard someone preparing to raise rates.

Waller said the opposite on Thursday. He would rather leave rates at 3.50–3.75% this month, provided inflation keeps easing.

Central bankers disagree often. It is less common for the second-most-watched person at the institution to reject the first one’s case in public, two weeks before a vote.

You can measure what that did, because people bet on Fed decisions. They do it through futures contracts, and the price of those contracts converts into a probability.

Before Waller spoke, the chance of a September rise was about 60%. By Thursday evening it was even. After Friday’s jobs report it was 58%. Bloomberg’s version of the same calculation reached 63%.

Twelve people vote on 15 and 16 September, Warsh and Waller among them. The evidence that settles it arrives first: US inflation figures on Friday 11 September.

The Fed is built to argue, so none of this is a crisis. It does mean nobody knows the answer yet, including the people who will decide. That is why a single data release moved expectations by ten points twice in two days.

3. The yen turned, and nobody had to buy it

Two interventions failed. The prospect of a rate rise did it in one week.

This letter has followed the yen since late July, when Japan and the US bought it together for the first time since 1998.

Buying your own currency to hold its price up is called intervention. A government sells foreign reserves and buys its own money, which lifts the price for as long as the buying lasts. Japan did it alone on 30 July and together with the US the day after. It held for about two weeks. Then the yen slid back through 160 to the dollar last week.

This week it rose 2.4%, to 156.26. On Friday it briefly touched its strongest level since 3 August. Nobody bought anything.

What changed is what people expect. Reports emerged that the Bank of Japan will raise its interest rate by a quarter point at its meeting on 17 and 18 September, and may go further after October. The market now puts the chance of that at 77%.

3.1 Why a Japanese rate rise moves the currency more than buying it does.

Japan’s official rate is 1.0%, but Japanese inflation runs higher than that. Subtract one from the other and the real cost of borrowing in Japan is around minus 0.9%. Money there is still effectively free, even after several increases. The central bank has room to keep raising without damaging its own economy.

Every rise also narrows a gap that has shaped markets for thirty years. Investors borrow yen at almost no cost and buy assets elsewhere that pay more. Raise Japanese rates and that stops being worth doing, so some of it gets unwound.

Japanese money is already coming home. The ten-year yield touched 3.00% on Tuesday, and a thirty-year auction this week met strong demand from Japanese pension funds, who bought their own government’s debt instead of sending the money abroad.

Both failed interventions taught the same lesson. Buying a currency moves the price for a few weeks. Only the interest rate changes anyone’s reason to sell it.

Data Check

Four economic releases landed this week that were worth watching. Two of them came in far above what economists expected, and both point the same way — towards a central bank that raises rates rather than holds.

The table below shows what was forecast and what actually arrived. The gap between those two columns is what moves markets, not the number itself.

The US services survey needs a short explanation. Every month the Institute for Supply Management asks purchasing managers at service companies one question: is business better or worse than last month? Fifty is the dividing line, so anything above it means growth.

August came in at 55.4, the second-highest reading since October 2024. The detail underneath is messier. New orders were the strongest since February 2023, which is good news. Employment came in at 47.8, meaning service companies cut staff for a second month running. Prices paid reached 72.6, the highest since July 2022.

Growing, hiring less, charging more. That combination is exactly what a central bank worried about inflation watches for.

The Credit Grind

Europe’s riskiest borrowers had their worst week in months. They now pay the same as America’s, for the first time this year.

A company that borrows pays two things added together.

The first is whatever the government pays. That sets the floor, because no company borrows more cheaply than the state it operates in.

The second is a premium on top, because companies go out of business and governments almost never do. The riskier the company, the larger the premium. That premium is what this section follows.

The table below has six rows and one job: to show what borrowing costs right now, and whether that is high or low compared with the past year.

The top two rows are governments. The four underneath are companies, sorted from riskiest to safest. And the last column is the one to read first — it tells you how unusual today’s number is.

Look at the first company row. European high yield means the debt of companies rated least likely to repay. It rose 9 basis points this week, to 265.

A basis point is a hundredth of a percentage point. So 265 means those companies now pay 2.65 percentage points more than governments do.

Nine basis points is the largest move on the board. It carried European high yield from the 6th percentile of its own year to the 34th. That final column counts how many days over the past twelve months were cheaper than today, so 34% means roughly a third of the year was lower. Two weeks ago the same column read 6%.

Now the row below. US high yield sits at 265 as well. That has not happened once this year. Europe has been the cheaper of the two for months — 19 basis points cheaper three weeks ago, 7 last week, and nothing at all now.

The two government rows above explain why. Both reached fresh twelve-month highs this week, up 10 and 9 basis points, because the ECB is expected to raise rates on Thursday. European companies were hit from both directions: the floor went up, and the premium on top went up with it.

US companies were not. Their high yield row moved 2 basis points and remains in the 2nd percentile — cheaper than 98% of the past year.

What this means if you own a corporate bond fund.
You are lending money to companies, so you should be paid for the risk that some of them fail. A fund holding European debt paid you more this week than last, which has not been true for a while. A fund holding US debt is still paying you close to the least it has all year, and the Fed may raise rates in eleven days.

The Onchain Pour

Bitcoin held $80,000 through a week that gave it every reason not to.

Bitcoin finished around $80,000, up under 1%. It crossed that level on Thursday, when Waller’s comments pushed the dollar to a four-month low. Tuesday had looked very different: $76,600, on the day Japan’s ten-year yield touched 3% and almost every risky asset in the world fell together.

That connection explains something that otherwise looks like coincidence. Cheap Japanese money has funded bets on higher-paying assets for thirty years, and crypto is one of them. When borrowing in Japan stops being nearly free, some of those bets get closed. The selling then shows up in places with no obvious link to Japan.

US bitcoin funds still took in $986.8 million across the week. The summer pattern holds: institutions keep buying while the price moves sideways. Ether recorded its third-best third quarter.

One oddity worth noting. Five wallets, each holding 50 bitcoin and untouched for sixteen and a half years, moved their coins this week. They date from 2010, when bitcoin traded for fractions of a cent and 50 coins was the reward for mining a single block. Each wallet is worth about $4 million today.

The Week Ahead

Thursday is the day that matters. The European Central Bank is expected to raise interest rates.

Monday 7 September.
German industrial production at 08:00, forecast 0.3%. Euro area growth for the second quarter is revised again at 11:00 and should confirm 0.4%.

Tuesday 8 September.
Japanese wage growth at 01:30, forecast 3.9%. The Bank of Japan watches this more closely than almost anything else before deciding. Chinese trade figures at 05:00 — exports rose 23.9% last month, and a slowdown there would matter for factories everywhere. German and French trade balances at 08:00.

Wednesday 9 September.
Chinese inflation at 03:30, forecast to slow to 0.7% from 0.9%. China is still exporting falling prices while everyone else imports rising ones. Christine Lagarde, who runs the ECB, speaks at 19:00 — the evening before her own decision.

Thursday 10 September — the one that counts. The ECB decides at 14:15.
The deposit rate is expected to rise to 2.50% from 2.25%. That rate is what banks earn for leaving money at the central bank overnight, and it sets the floor for what everything else in the euro area costs. Markets have almost fully priced the increase since inflation reached 3.3%. The press conference at 14:45 matters as much as the decision, because the real question is whether the ECB keeps going afterwards. US producer prices and jobless claims at 14:30.

Friday 11 September — US inflation at 14:30.
Forecast is 3.4% for the year and 2.4% for the core measure, which leaves out food and energy. This is the last major evidence before the Fed votes, and given how openly Waller and Warsh disagree, it may decide the outcome. UK growth figures at 08:00.

☕ Last Sip

Three central banks meet within eight days of each other, and the same thing is pushing all of them the same way: an oil price that will not stop rising.

Europe goes first on Thursday. America and Japan both decide the following week, almost at the same hour. Between now and then, the only new evidence is Friday’s US inflation report.

It has been a while since three of the world’s largest central banks were all leaning towards higher rates at once. You have to go back to 2022.

Enjoy the first proper weekend of September. See you next Sunday for the next episode of The Weekly Steep.

Sources

Market levels: CNBC and Investrade for the US closes; Trading Economics for European and Asian indices and yields; Bloomberg for the euro area government curve; Zaikei Shimbun and MyForex for the New York close in dollar-yen and euro-dollar; News On Japan for the Nikkei. Economic releases: US Bureau of Labor Statistics, ADP, Challenger Gray & Christmas, Institute for Supply Management, Eurostat, Trading Economics calendar. Credit and euro curve: ICE BofA indices via FRED and the ECB Data Portal, from my own pipeline. Onchain: Cointelegraph and CoinGecko. Weekly changes are measured against the levels published in edition #6. Analysis and personal opinion — never investment advice.

Wednesday’s inflation report missed by one tenth of a percentage point. The Federal Reserve’s preferred measure came in at 3.7% for the year against 3.6% expected — a rounding error by most standards.

It was enough. Gold, which had spent a month rising on worries about government debt, fell below $4,600 and closed the week at $4,506, down 3.4% on Friday alone. Bitcoin, which had reached $81,235 that morning, was under $78,000 by the American open.

Then Friday brought Kevin Warsh to Jackson Hole, in his first keynote as Fed chair. He said inflation indicators do not suggest the trend has meaningfully improved, and that describing financial conditions as restrictive is difficult. Traders moved the odds of a September rate rise from 35% to 57% in a single afternoon.

Underneath all of it, Nvidia reported the strongest quarter of its life and added $442 billion of market value in a day.

The Scoreboard

Look at the two ends of the American yield curve. They moved in opposite directions, and they swapped places with last week.

American shares finished higher for the week despite falling on Friday. The S&P 500 was up 0.5%, the Nasdaq 0.9%, and all that while smaller domestic companies dropped 1.4% during the week.

The two-year government borrowing rate rose 16 basis points while the thirty-year fell 6. That move is the exact opposite of what happened last week. Korea gave back the whole week on Friday alone, they are down 1.8% as foreign investors sold 1.76 trillion won of equities.

But the most interesting line on the board is the yen. On Friday it fell back through 160 per dollar which was the fifth falling day in a row. On 31 July, Japan and the United States bought yen together to stop it falling. They had not done that since 1998. The yen got stronger for about two weeks, but it has lost all of it already again. But why should a European reader even care about a Japanese currency that much you might ask?

Japan has kept interest rates near zero for thirty odd years. Money is cheap there and expensive almost everywhere else. So for decades, investors have borrowed yen cheaply and used it to buy things that pay more. Whether that was American government bonds, European bonds, shares, almost anything that yields more than owning a falling currency. Japanese savers and pension funds did the same with their own money. Japan became the world’s biggest lender.

That works while the yen keeps falling, because you repay your loan in a currency worth less than when you borrowed it. It’s like shorting a company that keeps on delivering bad earnings releases. A no brainer one might think. But what happens when the yen turns around, and then everyone tries to unwind the same trade at once?

They sell what they bought and buy yen to repay. That is why a currency most people never think about can move share prices in New York and bond prices in Frankfurt.

Two things pushed it down this week. Warsh made a US rate rise more likely, and higher American rates pull money out of yen and into US-dollars. Secondly Japan’s finance ministry said it may plan its 2027 budget around paying 3.8% interest on its debt, up from 3%. This would mark a government getting ready for its own borrowing to cost much more.

Above 160, people watch for another intervention. Treasury Secretary Bessent wrote to Senator Warren this week that big, messy moves in the yen would be bad for world markets. Nobody has said what level would make them act.

That is one line on the board. Here is the whole board at once, with each asset drawn as big as its move.

The two largest circles are both commodities, and both are red. Oil fell 4.5% as Iran and Oman kept talking about the Strait of Hormuz. Gold fell 3.5% for a completely different reason and that reason is the first chapter that we cover shortly.

Notice what is missing: any big green circle among the equity indices. The four stock markets on the board barely moved. Everything that did move was a currency, a commodity or a crypto asset. That is what a week looks like when the news is about central banks rather than companies.

1. The trade that needed soft inflation

Last week’s letter named the condition that would break the gold-and-bitcoin story. It broke three days later.

Two weeks ago this letter argued that gold and bitcoin were rising for the same reason: investors doubting that governments could handle their debts without inflating them away. It closed with a test to watch whether the two keep moving together, because if they separate, the story was doing less work than it looked.

On Wednesday the Bureau of Economic Analysis reported that the price index the Fed actually targets rose 3.7% over the year, against 3.6% expected. The core measure, which strips out food and energy, came in exactly on forecast at 3.3%.

One tenth of a percentage point, on the headline number only. Gold broke below $4,600 within the hour. Bitcoin gave up $3,000. By Friday, after Warsh spoke, gold had fallen another 3.4% to $4,506, its worst day in months.

But what does this tell us? If the trade were really about governments debasing their currencies over years, a one-tenth miss on a monthly inflation print should not touch it. What actually happened is that both assets were being bought on the expectation of falling interest rates. Higher rates make holding something that pays no interest more expensive, and both gold and bitcoin pay no interest and no dividends

So the trade was real, but its reasoning was shorter-term than its own story suggested. Worth remembering the next time a market move arrives with a grand explanation attached.

2. Warsh, and the curve that turned around

The Fed chair gave no guidance and moved the market anyway.

Last week’s letter described a market worried about government debt: long-term borrowing costs rising, short-term ones falling. This week it did the exact opposite and the reason was the Fed’s chairman.

Warsh spoke at Jackson Hole on Friday afternoon. He committed to nothing and declined to say what would make him move. But he said inflation data do not show meaningful improvement, that if inflation does not head to 2% quickly there is work to do, and that it is hard to call current financial conditions restrictive.

You can watch the market change its mind in real time, because people bet on this. Polymarket runs a market on the September Fed decision with $66 million of money in it — anyone can buy a share that pays out if the Fed raises rates, and the price of that share is the crowd's probability.

At two o’clock on Friday afternoon, before he spoke, the crowd gave a rate rise a 28% chance. By two in the morning it was 50%. As of Sunday morning it sits at 47%, against 51% for no change at all.

The futures market, where banks hedge rather than bet, moved even further. From about 35% to 57%.

The two-year yield, which mostly reflects what people expect the central bank to do, rose 16 basis points on the week to 4.34%. The thirty-year, which depends more on how much debt is being sold and who wants it, fell 6 basis points to 5.21%.

So what does that mean? Higher short-term rates slow the economy, and a slower economy means less inflation later. So the market is saying: tighter now, calmer later. It is the opposite of last week, when the message was that nobody wanted to lend long at any price.

But note where it landed. Not at “he will raise”, just at “it could go either way”. One speech turned a settled question into a coin flip, and Friday’s jobs report will most likely decide further steps.

3. Nvidia had the best quarter of its life

$96 billion of revenue, a forecast of 70% growth, and $442 billion added in a single day.

Nvidia reported on Wednesday after the close. Revenue of $96.22 billion, more than double a year earlier. Adjusted earnings of $2.22 a share. And guidance for roughly 70% revenue growth in the coming financial year. These numbers are just incredible to say the least.

Based on these news the stock rose nearly 9% on Thursday, adding $442 billion of market value. This was the largest single-day gain for any company since April 2025. That one move lifted the entire Nasdaq 100 by 1.4%.

Then on Friday it fell more than 3%, because Warsh spoke.

That sequence is the whole argument about this market in miniature. The company that carries the index delivered everything anyone could have asked for. But still, it was not enough to outweigh a central banker declining to rule out a rate rise. When borrowing costs go up, profits arriving years from now are worth less today. And Nvidia’s valuation rests almost entirely on profits arriving years from now not today.

4. France is where Europe is nervous now

Not Italy, not Greece. French banks fell 5% on Thursday over the country’s public finances.

Two weeks ago this letter noted, almost in passing, that France is not usually where European bond stress shows up first. It is now showing up there in equities as well.

On Thursday the CAC 40 fell about 1.7% to a one-month low while the broader European index dropped 0.7%. BNP Paribas, Société Générale and Crédit Agricole each lost roughly 4% to 5%. The trigger was a growing doubt about whether France can control its budget deficit while candidates for next year’s presidential election promise more spending.

Banks fall first in this kind of worry because they hold large amounts of their own government’s debt. If those bonds lose value, the banks holding them do too.

France’s ten-year borrowing cost touched 4.10% earlier this month, its highest since 2009. Germany’s sits at 3.29%, the highest since 2011. Meanwhile the gap between Italy and Germany finished the week at 82 basis points and barely moved. The country the market used to worry about is now the calm one.

Data Check

Every inflation report comes in two versions. The headline counts everything people buy. The core version leaves out food and energy, because those two jump around for reasons that have nothing to do with the wider economy. Let it be a cold winter, a war, a bad harvest.

Central banks watch the core number, because it shows the trend they can actually influence. So on paper, Wednesday was fine: core came in at 3.3%, exactly as forecast.

The headline came in at 3.7% against 3.6% expected. And that is the number the market traded.

The reason is simple enough. Households do not get to exclude petrol and groceries from their own budgets. Neither do the people setting wages, and neither do the traders trying to guess what a new Fed chair will do at his first meeting. When a central banker has spent the month sounding worried about inflation, a hot headline is what he gets asked about.

One tenth of a point, on the number that officially matters less, and it took 3.5% off gold and $3,000 off bitcoin.

A second number, quietly good.
Two weeks ago this letter flagged Friday’s annual revision to American job figures. This is the exercise where the statistics office goes back and corrects a year of its own counting. Last year it removed 911,000 jobs after the fact, which was one reason nobody trusted the labour data. This year it removed 79,000. A tenth as much.

The Credit Grind

Lending to America’s weakest companies pays less right now than on any day in the past year. In the same week the Fed chair said rates may go up.

When a company borrows money, the rate it pays consists of two things.

First, whatever the government pays. Governments are the safest borrowers there are, so their rate is the floor. Nobody borrows cheaper than the state they sit in.

Then you add a premium on top of that base rate. A company can go out of business and stop paying. A government almost never does so. That’s why lenders want more to take on that kind of risk. A large, solid company might pay a little extra. A struggling one pays a lot. That extra payment is what this section follows every week.

The size of it tells you two things at once. It says how likely lenders think it is that they will not get their money back. And it says how badly they want to lend at all. When there is more money looking for a home than there are potential borrowers, lenders compete, and competing means accepting less compensation.

This week the second reason (the competition among lenders)) is the one to watch. The premium did not fall because these companies got safer. Nothing about them changed. It fell because there is more money looking to lend than there are companies looking to borrow, so lenders simply undercut each other.

Now let’s look at the second row: America’s weakest companies. They now pay 263 basis points extra, which is 2.63 percentage points on top of the government rate.

The last column says 0%. That column tells you how many days in the past year were lower than today. Zero. None of them. In a whole year of trading, this is the day lenders asked these companies for the smallest extra payment.

Now look at the two rows above. Both are at 98%, almost the highest of their year. Those are European governments. So in one week: Europe’s safest borrowers are paying near their yearly high, and America’s riskiest are paying their yearly low.

One thing I got wrong. Last week the American investment-grade row was at 78%, and I wrote that borrowing trouble was spreading to companies. It is back at 45% now. That reading lasted seven days.

What this means if you own a corporate bond fund.
You are lending to companies, so you should be paid for the risk that some of them fail. Right now almost nothing you earn comes from that. It comes from the base rate. So essentially the part you would get from a government bond anyway. Simply put: you are taking on company risk and being paid government prices.

The Onchain Pour

Bitcoin ended the week higher, having been $1,700 higher still on Wednesday morning.

Bitcoin closed around $79,500, up 2.9% on the week. That number hides a round trip: it reached $81,235 on Wednesday before the inflation report, fell below $78,000 within hours, then recovered.

The month as a whole was remarkable. Bitcoin was near $62,800 at the start of August and peaked about 28% higher. Ether finished around $2,505, up 2.8%.

Ether funds took money in on ten consecutive trading days. Bitcoin funds broke their own streak on Friday with $201 million of net outflows, the first day of selling after the run.

Two structural items. Solana’s validators voted to double the rate at which new coin issuance falls, cutting an estimated 18.9 million coins from supply over six years. And American M2 money supply, which stands for the broad measure of cash and deposits, rose $102.8 billion in July to a record $23.22 trillion, its 27th consecutive monthly increase.

That second number is the entire argument for holding scarce assets, still running quietly in the background while the price of holding them went up this week.

The Week Ahead

This week has one question running through it, and every release either supports Warsh or undermines him. He argued on Friday that inflation is not falling fast enough and that money is still too easy. The week’s job is to check both halves of that.

Monday 31 August.
China’s factory survey at 03:30, expected to stay below 50 — the line between growing and shrinking. China’s factories set prices for a lot of what the rest of the world buys, so a weak reading is mild good news for inflation everywhere else. German inflation for August at 14:00, forecast to rise to 2.9% from 2.8%.

Tuesday 1 September — the European one.
Euro area inflation at 11:00, forecast at 3.2% against 2.9% last month. That would be the highest reading of the year, and it arrives two weeks before the ECB meets. If it comes in at or above forecast, the argument in Frankfurt shifts from holding rates to raising them, and every European mortgage and business loan sits downstream of that. US job openings at 16:00 (consensus 7.39 million) is the first of four labour readings this week.

Wednesday 2 September.
Private payrolls at 14:15 (consensus 59,000) — a private company’s count of American hiring, published two days before the official one and often the first hint of it. The Bank of Canada decides at 15:45, expected to hold at 2.25%, in the week its largest trading partner put 50% tariffs on some of its goods. The Fed’s survey of regional business conditions at 20:00 is worth more than usual: it is written by the same regional presidents who will vote in three weeks.

Thursday 3 September.
The US services survey at 16:00 — the sector that produced last week’s upside surprise, and the one that employs most Americans. Jobless claims at 14:30 (consensus 203,000). Then two Fed officials speak, Waller at 14:30 and Hammack at 21:00, both with a chance to tell us whether Warsh was speaking for himself or for the committee.

Friday 4 September — the one that counts. US payrolls at 14:30.
Consensus is 45,000 new jobs after last month’s loss of 23,000, with unemployment ticking up to 4.2% from 4.1%.

This is where the week resolves. A central bank raising rates into a weakening labour market is a very hard thing to justify in public. Weak numbers and Friday’s whole move reverses. Strong numbers and Warsh has what he needs for 16 September. Canada reports its own employment figures at the same hour.

☕ Last Sip

The week’s lesson is about how quickly a story can change owners. For most of August the market worried that governments were borrowing too much. By Friday it worried that a central bank would raise rates instead.

Both worries are real, and they pull in opposite directions for anyone holding bonds. Too much government debt makes long-term lending expensive. A central bank raising rates makes short-term lending expensive. This week the second one won the argument, and the shape of the yield curve simply flipped over to match.

There is a reason it can turn that fast. Neither worry is a fact yet. Nobody knows whether Warsh will actually raise rates in three weeks, and nobody knows how much debt the world will absorb before it demands a higher price. Markets have to put a number on both anyway, every day. So the number moves whenever someone credible says something new. Last week the most credible person in the room spoke for the first time in that job.

Friday brings the American jobs report, and it will settle rather a lot. Weak numbers make a September rate rise hard to justify and the whole week’s move goes into reverse. Strong numbers and Warsh has what he needs.

Enjoy the last days of summer. See you next Sunday for the next episode of The Weekly Steep.

Sources

Market levels: CNBC and Yahoo Finance for the US closes; Trading Economics for European and Asian indices and yields; Zai Diamond and Zaikei Shimbun for the New York close in dollar-yen, euro-dollar and gold; Korea Times and Asia Business Daily for the KOSPI. Economic releases: US Bureau of Economic Analysis, US Bureau of Labor Statistics, Eurostat, Trading Economics calendar. Credit and euro curve: ICE BofA indices via FRED and the ECB Data Portal, from my own pipeline. Onchain: Cointelegraph. Weekly changes are measured against the levels published in edition #5. Analysis and personal opinion — never investment advice.

On Wednesday morning the US Treasury announced it would at least double the size of its bond buybacks. This are the operations where the government buys back its own debt from its investors. As a result of these actions the long-term borrowing costs fell immediately. The thirty-year rate dropped about ten basis points.

But by Thursday the entire move had reversed. By Friday the thirty-year closed at 5.27%. This marks its highest weekly close since June 2007.

Two things went up instead. Gold rose more than 5%, with its fifth straight weekly gain. Bitcoin rose 22%, its best week in two years. Equities fell. When investors sell government bonds and buy things outside the fiat-backed system, they are usually saying something about their confidence in the government doing the borrowing.

Then, right after the week had ended: trade talks between the United States and Canada collapsed shortly before a midnight deadline on Friday, and 50% tariffs took effect on about $20 billion of Canadian goods. Canada has promised to match them dollar for dollar.

The Scoreboard

This week everything a government issues had a bad week. Everything a government cannot create had a very good one. That’s the major insight.

Reading the board. American equities fell for the first week since late July. The S&P 500 down 1.4%, the Nasdaq 2.1%, despite rising on Friday. Long-term government borrowing costs rose while short-term ones slipped, which is the shape of a market worried about debt.

Europe followed the same pattern. Germany's ten-year yield reached its highest since 2011 during the week, and France's touched 4.10% on Tuesday, a level last seen in 2009.

Japan’s Nikkei index fell 4.2%, the largest equity move on the board, after its own ten-year yield hit a thirty-year high mid-week.

But the interesting part is what rose instead: Brent crude up 6.2%, gold up 5.4%, bitcoin up 22.5%, ether up 30%. Oil had its own reason in the Iran conflict. The other three share one: nobody can create more of them by decision.

But now let’s dive deeper.

1. The intervention that lasted a day

The Treasury stepped into its own bond market on Wednesday but the market handed the money back by Thursday.

Let’s start with what a buyback is. The government has already sold bonds that will not mature for decades. A buyback means it goes into the market and buys some of them back early. But why would they do that, you might ask? It’s quite simple: Fewer bonds available means a higher price for the ones that remain, and a higher price means a lower yield since the two always move in opposite directions.

On Wednesday the Treasury said it would at least double these operations for bonds maturing in ten to thirty years, running from 9 September to 4 November. As a consequence bond yields with a long maturity fell straight away.

That sounds good generally speaking. But the problem is more complicated than one might grasp straight away, because who wants to finance this relocation? There really is only one way. The Treasury has to raise that money elsewhere. It does so by issuing more short-term bills. So the total debt does not shrink at all - it simply gets shorter. And short-term debt has to be refinanced sooner, at whatever rate happens to prevail then.

Investors worked this out within a day. The market’s own measure of expected inflation rose to its highest in more than two months, meaning traders read the operation as more likely to create inflation rather than to reduce borrowing costs. The thirty-year yield climbed straight back to where it had been before the announcement.

Secretary Bessent said afterwards that he has “a big tool kit”. This week the market tested one of the tools and gave it about twenty-four hours.

2. This is not an American problem

Germany, France and Japan all hit multi-decade highs in the same week.

It would be very easy to read this past week as a story about American deficits. Unfortunately the rest of the world faces the same problem.

Germany’s ten-year yield climbed above 3.25%, its highest since March 2011. France’s touched 4.10% on Tuesday, the highest since June 2009 — and France is not usually where European bond stress shows up first. Japan’s ten-year yield reached just under 3%, a thirty-year high, in a country that spent most of those thirty years with interest rates near zero.

The common factor is not any one government’s budget. Rich countries as a group are borrowing more, at the same time, into a market with a finite appetite for long-dated debt — while the central banks that spent a decade buying that debt have stopped. And governments are no longer the only ones queueing. American companies have issued almost $1.7 trillion of bonds this year, 27% more than last year, much of it to build AI capacity. That money competes for the same buyers.

If you are a European reader this matters more than you might think. The German ten-year yield is the reference rate for the whole euro area. When it rises, so does what Italy, France and Spain pay, and so eventually does what banks charge for mortgages and business loans.

3. Gold and bitcoin did the same thing this week

Two very different assets rose hard in the same days that government bonds fell and this is no coincidence.

Gold finished around $4,671 an ounce, up more than 5% and its fifth consecutive weekly gain. Bitcoin rose about 22% to roughly $77,240, touching $79,000 on Friday — its best week in two years. Both moved while equities fell and while government borrowing costs hit multi-decade highs.

Generally speaking, a government with a large debt has two ways out that do not involve raising taxes or cutting spending: borrow more, or let inflation quietly reduce what the debt is worth. Investors who think the second is likely want to hold things whose supply nobody controls. Gold has been that for thousands of years. Bitcoin was designed to be it.

On Friday one of the largest investors in the world said exactly this out loud. Ray Dalio, who built Bridgewater into the biggest hedge fund on earth, wrote that America’s finances are “at an inflection point” and told investors to hold fewer bonds and put 10% to 15% of their money into gold, plus “a bit” of bitcoin.

His point being: about $5.5 trillion of government revenue this year against $7.5 trillion of spending, roughly $1 trillion of that going on interest alone, and some $10 trillion of existing debt that has to be refinanced. His guess at when this breaks is three years, give or take two. What makes the timing striking is what he named as evidence: Japan selling American bonds, long-term yields at multi-year highs, and Bessent’s buyback announcement. Those are the first two chapters of this letter.

Take the recommendation with the caveat it deserves. Dalio has spent years arguing bitcoin cannot replace gold and warning about its privacy and security risks. “A bit” is doing real work in that sentence.

Bitcoin also had reasons of its own this week. Exchange-traded funds took in $1.67 billion over five consecutive days, BlackRock alone bought more than a billion dollars of bitcoin and ether in two days, and Washington made a renewed push to pass crypto market rules. Those would have lifted the price whatever bonds did.

Watch whether gold and bitcoin keep moving together. If they separate, the debasement story was doing less work than it looks.

4. The economy refuses to give one answer

Last week the consumer looked broken. This week business activity hit a four-year high.

Last week’s letter reported that American retail sales fell 0.6% in July and consumer confidence came in at 51 against a forecast of 55. The picture was of a household sector running out of road.

This week’s data says something else. The flash survey of American business activity for August came in at 56.0 against a forecast of 54.0, the strongest reading since 2022, with services doing the work at 56.8 against 54.0 expected. Manufacturing was the exception, slipping to 53.2 against 53.9 expected, though anything above 50 still means growth.

And new claims for unemployment support fell to 206,000, a level the American labour market has not been far from all summer.

That last number needs a word of explanation, because it looks impossible next to a month in which the economy lost jobs. Initial claims count people who have just been laid off. They measure firing, and firing alone. The payroll figure is a net number: everybody hired, minus everybody who left for any reason.

Both can be low at the same time. If companies stop firing but also stop hiring, jobs disappear quietly. Let it be through retirements, through people leaving voluntarily, through graduates who never find a first position. None of those people can file a claim. Someone who quits generally has no entitlement, someone who retires has none, and someone who has never worked has nothing to claim against.

So the picture is not a strong labour market and a weak one at once. It is a market where almost nothing is happening in either direction. Few people losing jobs, few people finding them. That is a fragile kind of stability, and it is why one bad quarter for company earnings would show up faster than usual.

Data Check

These are survey numbers, so it is worth knowing what they actually measure. Every month S&P Global asks purchasing managers at thousands of companies one simple question: is activity higher or lower than last month? The answers get turned into a single figure where 50 is the dividing line. The August readings below are "flash" estimates, published from roughly the first four fifths of responses, which is why they arrive two weeks before the final version.

The services figure was the surprise. At 56.8 against 54.0 expected, it is the strongest American business survey since 2022 — and services is where the large majority of Americans work, which makes it the more consequential of the two. Manufacturing went the other way, at 53.2 against 53.9, though it is still comfortably in growth territory.

Europe grew too, more modestly, at 52.1. The composition there is the opposite of America’s: factories did the work, largely in Germany, while services barely improved.

Keep one limitation in mind. A survey records how business feels to the people running it. It does not count anything. Last week’s retail sales figure counted actual purchases and fell 0.6%. Both numbers can be accurate at the same time, which is exactly the tension the chapter above describes.

The Credit Grind

The safest government bonds in the euro area now yield more than at almost any point in the past year. The riskiest companies in Europe are paying almost the least.

A borrowing company pays two prices added together: the base cost of money, set by what governments pay, and a surcharge for the chance it fails to repay. This week those two moved in opposite directions, which is the whole point.

Look at the top two rows. Both euro government maturities sit at the 99th percentile of their own year, meaning there was only one day in the past twelve months when lending to a top-rated European government paid better than it does now. Both are within a basis point of their twelve-month high, and both got there in a single week — up 10 and 12 basis points.

Now the bottom four. Euro high yield tightened again to 256 basis points, the 5th percentile of its year: investors were paid more than this on 95% of the past year’s trading days. Compare that with the American rows. US investment grade — the debt of large, solid companies — jumped from the 48th percentile last week to the 78th. US high yield went from the 9th to the 23rd.

So the bond stress is reaching American corporate borrowers and has not yet reached European ones. Europe now pays 19 basis points less than America for junk-rated debt, the widest gap in weeks.

If you hold a European corporate bond fund, nearly all your yield now comes from the government part, and that part just got more valuable. The compensation for company risk is close to the thinnest of the year.

The Onchain Pour

Bitcoin’s best week in two years arrived exactly where last week’s warning signal said a bottom might form. And the way it happened matters more than the size of it.

Last week’s letter noted that only 51.4% of all bitcoin was worth more than its owner had paid, the weakest reading since 2023. That level has historically appeared near market lows, and also shortly before further falls. This time it was the first.

Bitcoin ended around $77,240, up roughly 22% on the week. Ether rose about 30% to near $2,438. Solana passed $100 for the first time since 3 February.

Here is the detail worth having. Open interest — the total value of outstanding bets on bitcoin’s future price — fell about 12% over the week and now sits at a five-month low, while the price rose 20%. Those two normally move together, because rallies usually come with more borrowed money chasing them. This one came with less.

That reframes the $5 billion of leveraged positions liquidated over three days. Most of those were bets that the price would fall, and clearing them out left a market holding more coins and less debt. A rally built on people actually buying is a sturdier thing than one built on borrowed money, even if it is no guarantee of anything.

The caveat stands anyway: bitcoin now shows its most overbought reading since November 2024, which describes how far and how fast it has come, not where it goes next.

The Week Ahead

Monday 24 August.
Quiet on the data. The White House is expected to publish details of what President Trump has called an “economic D-day” against Iran — oil rose more than 5% last week on the anticipation alone.

Tuesday 25 August.
German business confidence at 10:00, forecast to improve to 87.2 from 86.6. US consumer confidence at 16:00 (consensus 91.2) is the first read on whether the collapse in sentiment continued into August. Then a two-year debt auction at 19:00 — the first of three this week, and the real test of whether last week’s buyback changed anything.

Wednesday 26 August — the one that counts. The July personal consumption expenditures price index at 14:30.
This is the inflation measure the central bank actually targets, rather than the consumer price index that gets the headlines. Consensus is 0.2% on the core measure for the month and 3.3% for the year. Second-quarter growth is revised at the same time, forecast down to 1.5% from 2.1%. A five-year auction follows at 19:00. And after the close, Nvidia reports earnings — the largest company in the index and the clearest read on whether the AI investment boom is still accelerating.

Thursday 27 August.
Jackson Hole opens, the annual gathering where central bankers say the things they have avoided all year. The ECB publishes the account of its July meeting at 13:30. Jobless claims at 14:30 (consensus 209,000), then a seven-year auction at 19:00.

Friday 28 August — the heavy one.
At 16:00, three things land together: Chair Warsh speaks at Jackson Hole, the final August consumer sentiment reading confirms or revises the 51 flash, and the Bureau of Labor Statistics publishes its preliminary annual revision to payrolls. Last year’s revision removed 911,000 jobs from the record after the fact. Euro area inflation flashes for France and Spain arrive during the morning.

Through the week.
Canada’s retaliation. Carney has promised to match the tariffs dollar for dollar but has not said on what. The direct sums are modest — about $20 billion of goods against nearly $900 billion of annual trade between the two countries, and the list runs to plywood, liquor and hockey equipment. What matters is whether it stops there.

☕ Last Sip

The lesson of the week is that a government can influence the price of its own debt for about a day. After that, the buyers decide.

Nobody failed to sell a bond this week, and nobody failed to pay one back. It is something slower and more ordinary: the group of people willing to lend to rich countries for thirty years has stopped growing as fast as the amount those countries want to borrow. Prices adjust until the two meet. What we watched this week was this adjusting.

The reason to pay attention, even if you own no bonds at all, is that this number sits underneath almost everything else.

Mortgages are priced off it. Company borrowing is priced off it. And every euro a government spends on interest is a euro it does not spend on anything else.

Next week gives us three auctions and a speech from Jackson Hole. That should tell us whether last week was a wobble or the start of something that keeps going.

Enjoy the last stretch of August. See you next Sunday for the next episode of “The Weekly Steep”.

Sources

Market levels: Trading Economics for indices, yields, currencies and commodities; CNBC and Yahoo Finance for the US closes; Il Sole 24 Ore and SoldiOnline for the Italian–German spread; Zai Diamond and Zaikei Shimbun for the New York close in dollar-yen and euro-dollar. Economic releases: S&P Global, US Department of Labor, Eurostat, Trading Economics calendar. Credit and euro curve: ICE BofA indices via FRED and the ECB Data Portal, from my own pipeline. Onchain: Cointelegraph and Yahoo Finance. Weekly changes are measured against the levels published in edition #4. Analysis and personal opinion — never investment advice.

Wednesday’s inflation report landed perfectly where economists expected it to. Consumer prices went up 3.4% over the year, down from 3.5%, with the core measure that strips out food and energy at 2.5%. Traders read it as the end of the rate-rise argument that has run all year. The probability of a US rate hike in September fell from about 57% a week ago to about roughly 30% by Friday. The equity market responded fast and share prices climbed to records.

The same Wednesday, the Treasury reported a $432 billion deficit for July. This marks the largest July on record. On Thursday it sold thirty-year debt at 5.216%, which is the highest rate since 2001.

But that is the odd thing that wonders investors. If the central bank is less likely to raise rates, borrowing should be getting cheaper. It got more expensive instead, because the government now has more bonds to sell than it can find buyers for at the old price.

Then Friday brought something nobody expected: American shoppers stopped spending.

The Scoreboard

Lets have a look at our weekly scoreboard to start our session. There are two major things that spark interest. The first is how little moved from one Friday to the next. Most of these numbers ended the week close to where they started, and a quick glance would tell you nothing much happened during this week.

But this is wrong. A lot has happened. American shares hit a record on Thursday but gave it back on Friday. The ten-year government borrowing rate touched a nineteen-month high on Tuesday before settling almost exactly where it began. Weekly numbers are a snapshot of two moments, seven days apart, but sometimes they hide everything in between. This was such a week where the space in between was the story.

There was not much happening in the US. The markets barely moved. The S&P 500 up 0.4%, the Nasdaq 0.1%, but both touched records on Thursday before Friday’s retail sales report knocked them back down.

Government borrowing costs look almost unchanged too: the two-year flat, the ten-year up 2 basis points. The two-year and the ten-year answer different questions, which is why they can move apart.

The two-year is basically a bet on the central bank. It barely moved because traders spent the week deciding a September rate rise was most likely off the table. This is because the week's data made a September rate rise look unlikely. Wednesday's inflation report came in on forecast rather than hot, and Friday's collapse in retail sales and consumer confidence made a central bank raising rates into a slowing economy hard to imagine. By Friday the market put the odds of an increase at roughly 30%, down from about 57% a week earlier.

The ten-year is a different kind of story. That is where the government does much of its real borrowing, and its price depends on something simpler: how many bonds are being sold, and how many people want them. On Tuesday it touched 4.75%, the highest in nineteen months, before easing to 4.68% by Friday.

This is the number to care about, because it sets prices well outside the bond market. It is what American mortgage rates are built on. Q thirty-year home loan costs about 6.7% today for this reason. Large companies borrow off it too.

So in essence the week’s message was this: Traders stopped expecting the central bank to raise rates in September. You can read that expectation off the futures market, where people bet on the decision months ahead. The prices of those bets translate into odds. A week ago they pointed to roughly a 57% chance of an increase. By Friday it was near 30%. Normally that alone would make borrowing cheaper across the board. It did not. The government raises money by selling bonds at auction. Each bond pays a fixed amount every year. So if buyers are scarce and the government has to accept a lower price, that fixed payment now represents a bigger return for whoever buys and a bigger return for the lender is a higher cost for the borrower. Price down, yield up. They are two ways of saying the same thing.

This week the government had a great deal to sell, and buyers were not enthusiastic. Thursday’s thirty-year auction went through at 5.216%, the highest since 2001. So the ten-year rate climbed even while the central bank looked less threatening. When those two move apart like that, the cause is usually not interest-rate policy. It is the sheer volume of debt coming to market, which is the subject of the first chapter below.

Europe was quiet, though Germany’s ten-year yield reached a fifteen-year high mid-week before settling at 3.20%.

Asia carried the real movement. Korea’s KOSPI rose 11.5%, the same index that fell 5.1% the week before. The yen weakened 1.6% to around 159 per dollar, its worst week in three months.

1. The government is borrowing faster than the market wants to lend

A record July deficit, and a thirty-year debt sale at the highest rate in a quarter century.

Governments spend more than they collect and borrow the difference by selling bonds. Buyers set the price. When there are more bonds than eager buyers, the government pays more.

July’s gap was $432 billion, a record for the month. For the fiscal year so far the total is $1.8 trillion which is already more than the government borrowed in all of last year, with two months still to run.

One honest caveat. August began on a weekend, so roughly $99 billion of August benefit payments went out in July. Adjusted, the shortfall was $333 billion, still up 18% on a year earlier, but not the big headline number.

The market answered on Thursday. The Treasury sold $25 billion of thirty-year bonds at 5.216%, the highest since 2001. Buyers put in $2.39 of bids for every dollar on offer, down from $2.44 at the previous sale. The government got its money, but it had to reach a little further to find it. Wednesday's ten-year sale drew the highest financing cost at that maturity since 2007.

Interest on money already borrowed has cost $1.17 trillion in the first ten months of this budget year which is 15% more than the same stretch a year ago. That interest is not something separate from the deficit. It is one of the largest items inside of it.

So the chain runs exactly like this: more borrowing pushes the rate up, a higher rate makes next year’s interest bill bigger, a bigger bill widens the deficit, and a wider deficit means still more borrowing.

Anyone who has carried a balance on a credit card will recognise this loop.

2. Prices cooled. Shoppers stopped anyway.

July inflation came in exactly on forecast, and Friday’s data showed the American consumer is pulling back hard.

Inflation at 3.4% is the second consecutive monthly slowdown, and core at 2.5% is back where it sat before the Iran conflict began. Petrol prices fell 2.9% during the month. This is what a fading energy shock looks like.

Then Friday came. Retail sales fell 0.6% in July against expectations of a small rise. This is the sharpest drop in over a year. Consumer sentiment came in at 51 against forecasts of 55. Weaker consumer sentiment, weaker economy.

But what caused this? One number explains the gap between the cheerful inflation report and the gloomy shopper. Prices rose 3.4% over the year. Average hourly pay only rose about 3.2%. Inflation slowing is not the same as prices falling, and the average American’s pay is losing the power.

Energy still does the damage even while it fades: petrol costs 24.6% more than a year ago, heating oil 39.1% more. The annual comparison improves every month. The bill each month does not.

3. Korea again — and I got half of it wrong

The index that fell 5.1% last week rose 11.5% this week, and the money came from abroad.

Last week I wrote that Korea’s market was falling because two memory-chip makers dominate its index, and that Korean savers were moving money into American shares. The first half held. The second needs correcting from my end.

The KOSPI closed Friday at 6,977.94, up 11.5% on the week and briefly back above 7,000, with five consecutive winning sessions. Memory chips led it up exactly as they led it down. Concentration cuts both ways, and one week is not enough to tell a structural problem from a bad fortnight.

What I did not anticipate: foreign investors bought a net 3.03 trillion won of Korean shares in a single session. So while Korean retail savers were buying American stocks in July, foreign institutions were buying the market those savers were leaving.

That is worth remembering about a whole class of story. “Locals are fleeing their own market” is compelling, and it was true. But it was also one side of the ledger.

4. The yen gave back half the rescue

Three weeks after the first joint US–Japan intervention since 1998, the currency is most of the way back down.

Last week’s letter said intervention buys time rather than fixing anything, because the interest-rate gap that pushed the yen down was still there. That resolved faster than expected.

The yen fell about 1.6% to roughly 159 per dollar, its largest weekly loss in three months, surrendering close to half the ground gained when Tokyo and Washington bought it together in late July. The 160 level that triggered the first intervention is back in no time.

There is a second-order effect that connects to the first chapter. Japan is among the largest foreign owners of American government debt. If Tokyo intervenes again it may need to sell US Treasuries to fund the purchase and traders priced that possibility into US long-term yields this week. A currency operation in Tokyo is now part of why Washington pays more to borrow and why the US has a specific interest in the yen.

The Bank of Japan meets on 17 and 18 September, and analysts expect it to raise its rate to 1.25% from 1%. To see why that matters more than another round of buying, look at the gap. Japan pays about 1% on its money. America pays between 3.50% and 3.75%. Money moves toward the better return, so an investor sitting on yen has a standing reason to sell them and buy dollars instead. That selling is the thing pushing the yen down, and it happens every day, in small amounts, from thousands of separate decisions.

Intervention does not touch any of that. It is one very large purchase on one afternoon. It moves the price for a few days but it changes nobody’s reason behind the moves.

Data Check

Two kinds of number came out this week, and they split cleanly.

One kind measures prices. Consumer inflation on Wednesday, producer prices on Thursday. Both landed almost exactly where economists had predicted.

The other kind measures what households actually do. How many filed for unemployment support, how much they spent in shops, how they feel about the months ahead. All of those came in worse than expected, and retail sales missed by a wide margin.

So the week was not really an argument about inflation. That question got answered on Wednesday and largely settled. What it opened instead is a different one: whether American households are still able to carry the economy the way they have for the past two years.

The Credit Grind

European junk-rated companies are paying the smallest premium over governments in almost the entire past year. In the same week those governments paid the most in decades.

A borrowing company pays two prices added together: the base cost of money, set by what governments pay, and a surcharge for the chance it fails to repay. This week those two moved in opposite directions, which is the point.

Euro high yield fell another 6 basis points this week, to 257. The direction is the confusing part: a smaller number means investors are asking for less extra payment to lend to these companies, not more.

How little? 257 sits in the 6th percentile of the past year. On 94% of the trading days behind us, lenders were paid more than they are being paid today. The American equivalent sits at the 9th percentile, almost as low.

Now hold that next to what governments pay. The two-year euro government yield sits in the 93rd percentile of its own year, the ten-year in the 92nd.

Normally these two move together. When borrowing gets more expensive in general, it gets more expensive for risky companies too. This week that broke apart. The same investors, in the same few days, wanted close to the most they have wanted all year to lend to governments and close to the least to lend to Europe’s weakest companies.

If you hold a corporate bond fund, that is worth knowing. Almost all of the yield you collect right now comes from the safe half. Very little of it is payment for the risk you are carrying.

The Onchain Pour

Bitcoin fell while the stock market held their records, and Washington moved closer to crypto than it has ever been.

Bitcoin ended Friday around $63,050, down 2.9% on the week. Ether finished near $1,870, down 2.1%. CryptoQuant reported that the share of bitcoin held at a profit has dropped into territory it has historically reached only near market bottoms. This is either a floor forming or a floor about to break. We will keep monitoring the current situation.

But the policy news was larger than the price news. A US regulator conditionally approved a bank charter for World Liberty Financial, the Trump family’s crypto venture: a sitting president’s family business receiving permission to operate as a bank in an industry his administration regulates.

The White House hosts executives from Coinbase, a16z, Ripple, Chainlink and the prediction market Kalshi on Wednesday.

The Week Ahead

Monday 17 August.
Japan’s second-quarter growth at 01:50 (consensus 0.5%). China’s July industrial production and retail sales at 04:00 — retail sales are forecast to pick up to 1.5% from 1%. Then the one worth marking: US foreign investment flows for June at 22:00, which shows how much American government debt overseas buyers actually bought. Given this week, that number matters more than usual.

Tuesday 18 August.
UK unemployment and wages at 08:00 (pay growth forecast to slow to 4% from 4.3%). German investor sentiment at 11:00, expected to improve to 30 from 26.3. US housing starts and building permits at 14:30, then pending home sales at 16:00 after last month’s 5.4% collapse.

Wednesday 19 August — the busy one.
UK inflation at 08:00 is forecast to jump to 2.9% from 2.6%. Lagarde speaks at 09:10. Euro area final July inflation at 11:00 (consensus 2.9%). A US twenty-year bond auction at 19:00 is the next test of the demand that wobbled on Thursday. Then the record of the July Fed meeting at 20:00 — the one where three officials voted to raise rates. What they said to each other is the clearest guide available to September.

Thursday 20 August.
The ECB publishes the account of its own July meeting at 13:30. US jobless claims at 14:30 (consensus 210,000) and the Philadelphia Fed factory survey, forecast to fall hard to 25.3 from 41.4.

Friday 21 August.
Japanese inflation at 01:30, with the core measure expected to rise to 1.8% from 1.6% — relevant to whether the Bank of Japan moves in September. Flash business surveys for France, Germany, the euro area and the UK through the morning, and the US equivalent at 15:45.

Through the week.
Home Depot, Lowe’s, Target and Walmart report. This the clearest read on whether Friday’s retail sales drop was a one month event or a turn.

Unscheduled and larger than all of it: the US–Iran ceasefire was reported at a standstill on Friday evening, and President Trump said he would declare the Strait of Hormuz United States territory.

That happened after markets closed and is in none of the numbers above.

☕ Last Sip

Two true things pointed in the exact opposite directions this week.

Inflation is fading and the central bank is standing down. The government’s borrowing costs hit a twenty-five-year high anyway. Both will still be true on Monday.

Enjoy what is left of August. See you next week for the next episode of The Weekly Steep.

Sources

Market levels: Trading Economics for indices, yields, currencies and commodities; Kiplinger and Yahoo Finance for the US closes; Il Sole 24 Ore for the Italian–German spread. Economic releases: US Bureau of Labor Statistics, US Treasury, Eurostat, Trading Economics calendar. Credit: ICE BofA indices via FRED, from my own pipeline. Onchain: Cointelegraph and CryptoQuant. Weekly changes are measured against the levels published in edition #3. Analysis and personal opinion — never investment advice.

The Week in One Sip

At 14:30 on Friday the US Bureau of Labor Statistics reported that the American economy shed 23,000 jobs in July. Economists had expected a gain of about 80,000. Within minutes the S&P 500, the index of America’s 500 largest listed companies, was heading for a record close.

That looks strange until you know what the argument in markets has been about all year. The US central bank has spent 2026 debating whether to raise borrowing costs, not lower them, and three of its officials voted for a rise in July. A labour market shedding jobs makes that case much harder, and cheaper borrowing lifts share prices. A bad number for workers arrived as a good number for shareholders.

Underneath ran a second story that never resolved. Oil fell hard early in the week as Iran and Oman negotiated a corridor through the Strait of Hormuz, the waterway that carried roughly a fifth of the world’s oil before the war.

Then Iran published its terms, they were stricter than anyone expected, and oil turned back up on Friday.

The Scoreboard

Look for a clean split. Everything that benefits from cheaper money rose, everything priced off the dollar or off oil went the other way, and one market broke ranks entirely.

Reading the board.
America ran the week: the S&P 500 up 3.6% to a record 7,757.64, the Nasdaq 5.2% as chip stocks bounced, and the Russell 2000 which consists of smaller, domestic companies rather than global technology, keeping pace at 3.5%. Government borrowing costs fell across every maturity.

Europe followed rather than led. The gap between what Italy and Germany pay to borrow for ten years narrowed to 77 basis points, which is the market saying it sees no particular stress in the eurozone.

Asia is where the calm number hides everything. Japan’s Nikkei rose 1.9% while the yen strengthened 2.1%. Korea’s KOSPI fell 5.1% in the same week the S&P hit a record. Gold did the most work of anything on the board, up 7.8% to around $4,343 an ounce.

1. The revisions mattered more than the headline

July’s jobs report was bad. What it revealed about May and June was worse.

A monthly jobs report carries two things: what happened last month, and a correction to what you were told about the months before. Almost all the coverage goes to the first. The money is usually in the second.

July came in at minus 23,000. But May and June were marked down too, heavily enough that average monthly job creation over the past year has collapsed to roughly 34,000. That reframes everything. This wasn’t one weak month interrupting a strong run — the run was already far weaker than the official numbers showed.

One detail explains a headline that otherwise makes no sense. The unemployment rate fell, to 4.1%, in a month when the economy lost jobs. The rate only counts people actively looking for work. The share of adults working or looking dropped to 61.4%, down 0.7 points this year, as close to 1.4 million people stopped looking. Leaving the labour force takes you out of the count.

So the headline flattered a genuinely poor month. Wages agreed: average hourly pay rose 3.2% over the year against the 3.5% expected. If you’ve been reading that the American labour market is fine, that claim got harder to make this week.

2. Record profits, and where they came from

Company earnings are running at levels not seen since the pandemic rebound. A meaningful slice is companies revaluing what they own.

With 88% of the S&P 500 reported, earnings are up more than 50% on the same quarter last year against an expectation of 23%. Margins are at a record. On the face of it, an extraordinary boom.

Two numbers deserve a second look. Alphabet booked roughly $98 billion in gains on investments it holds but hasn’t sold, and Amazon around $53 billion from its stake in Anthropic. Both are legitimate under accounting rules. Neither is money from selling anything to a customer. Strip them out and growth is still above 30%, so the boom survives — but a profit from marking up a shareholding behaves very differently in a downturn than a profit from sales.

Look one layer below the index heavyweights and it gets uneven. United Wholesale Mortgage, the largest mortgage lender in the United States, fell 34.8% in a single session on 6 August to an all-time low. Lumber has traded down eleven days running, its longest losing streak since April 2024. Housing and construction are not having the year the index is having.

Both things are true at once, and the distance between them is what to watch.

3. Korea fell five percent while everyone else rose

A memory-chip selloff took Korea’s market down hard in a global rally — and Korean savers are voting with their money.

Korea’s KOSPI closed Friday at 6,258.77, down 5.1% on the week. The S&P 500 rose 3.6% over the same days. That’s an unusually wide gap between two markets that normally move together.

The cause is concentration. Korea’s index leans heavily on two memory-chip makers, and memory had a bad week — SK Hynix dropped 4.8% on Friday alone, extending a selloff that has run for weeks. When two companies carry that much of an index, their bad month is the country’s bad month.

What makes it more than a market story is where Korean money went instead. Retail investors in Korea bought $4.6 billion of US shares in July, roughly seven times June’s figure. Ordinary savers are moving out of their home market into someone else’s. That’s slow-moving rather than a crisis, but a country whose savers prefer foreign assets has a harder time funding its own companies.

4. The currency two governments moved

The US and Japan bought yen together for the first time since 1998, and the American reason is about American borrowing costs.

When a currency falls too far, a government can step into the market and buy it with its own reserves. It’s a blunt tool and usually a national one. In late July it stopped being national.

Japan intervened alone on 30 July, with the yen close to 164 per dollar — roughly a forty-year low. The next day the US Treasury joined, selling euros and buying yen through the New York Fed. Coordinated intervention between the two hadn’t happened since 2011, and coordination in the direction of buying yen not since June 1998. It has held so far: the yen closed Friday at 156.68, a little over two percent stronger on the week.

The interesting part is the American motive. A weak yen and rising Japanese interest rates travel together, and Japanese investors are among the largest owners of US government debt. If yields at home rise far enough, that money goes back to Tokyo and America pays more to borrow. Washington had a domestic reason to defend the yen.

Intervention buys time. The gap in interest rates that pushed the yen down is still there.

Data Check

Everything pointed the same way before Friday. Job openings, private payrolls and the services survey all came in below expectations, and then the employment report confirmed the direction.

Consensus is the median forecast from Reuters and Bloomberg surveys of economists, published free by Trading Economics. Markets move on the gap between forecast and outcome.

The payrolls miss was the largest surprise of the week by a distance — 103,000 jobs between forecast and outcome. Worth remembering when the unemployment rate gets quoted on its own over the coming months.

The Credit Grind

One number: what investors charge America’s weakest-rated companies for the risk that they fail to repay.

It fell to 271 basis points this week — 2.71 percentage points of extra yield above what the US government pays to borrow. That is the 8th percentile of the past year, meaning investors were paid more than this in 92% of the last twelve months. They are accepting close to the least compensation for corporate default risk on offer in a year, and they accepted less of it this week than last.

Extra yield over government bonds for high yield borrowers, past twelve months. Pipeline run of 6 August 2026, ICE BofA indices via FRED.

One corner went the other way. Euro-denominated debt from emerging-market companies widened 9 basis points — the only part of this market where investors demanded more. Those borrowers sit closest to the energy story, and Hormuz moved against them.

High yield covers companies rated below investment grade. Levels are 6 August, one day behind everything else on the Scoreboard.

If you hold a corporate bond fund, this is what you are being paid to take risk — and right now it is thin.

The Onchain Pour

Bitcoin went nowhere in particular, which given everything else happening is itself informative.

Bitcoin ended Friday around $64,940, up 1.6% on the week after touching $65,300 on the jobs report. Ether finished near $1,910. Funds that hold bitcoin directly took money in every single day of the week.

The structural news mattered more. The US Treasury sanctioned two Iranian exchanges for allegedly moving money for the Revolutionary Guard — the same conflict driving oil, arriving in crypto. Legislation to give the industry clear US rules hit another setback, with Senator Lummis promising to keep pushing. And developers are arguing over a proposed change to Bitcoin’s rules, BIP-110, openly enough that a network split is being discussed.

One thing for anyone holding coins themselves: losses from the Coldcard hardware wallet exploit have passed $111 million.

The Week Ahead

Monday 10 August.
Quiet. Japan’s central bank publishes the summary of opinions from its July meeting at 01:50, worth a glance for how close another rate rise is.

Tuesday 11 August.
Australia’s central bank decides at 06:30, expected to hold at 4.35%. US small-business optimism at 12:00 (consensus 97.1). Existing home sales at 16:00 (consensus 4.07 million) matter more than usual after this week’s mortgage-sector trouble. A three-year debt auction at 19:00 gives the first read on demand since the jobs shock.

Wednesday 12 August — the one that counts. US consumer price inflation for July, 14:30.
Consensus is 3.4% for the year, down from 3.5%, with the core measure that strips out food and energy at 2.5%. This decides whether Friday’s jobs report ended the rate-rise debate or merely paused it; a hot print puts September back in play immediately. Germany’s final July inflation at 08:00. The IEA oil market report at 11:00 and OPEC’s monthly report later both carry extra weight with Hormuz unresolved.

Thursday 13 August.
UK second-quarter growth at 08:00 (consensus 0.4%, down from 0.6%). US producer prices at 14:30 — the inflation companies face before it reaches shop shelves, consensus 0.2% on the core measure — alongside weekly jobless claims at 198,000. Then Hammack speaks at 14:15. She voted to raise rates in July, so how she sounds after a negative jobs print tells you how firm that camp still is. Barkin follows at 14:40.

Friday 14 August.
Euro area second-quarter growth, second estimate, at 11:00, consensus confirming the 0.4% flash. US retail sales at 14:30, consensus 0.2%, the cleanest read on whether households keep spending while the job market softens. Michigan consumer sentiment at 16:00 (consensus 54, down from 55.2).

Unscheduled and larger than anything on that list: Iran’s parliament is reviewing the draft terms for reopening the Strait of Hormuz.

☕ Last Sip

Two weeks ago the question was whether the US central bank would raise rates in September. After Friday that mostly answers itself, which loads the whole week onto Wednesday’s inflation number.

Enjoy the quiet part of August while it lasts. Bis nächsten Sonntag zur nächsten Folge von The Weekly Steep.

Sources

Market levels: Trading Economics for indices, yields, currencies and commodities; Reuters and CNBC for the US closes; Il Sole 24 Ore for the Italian–German spread. Economic releases: US Bureau of Labor Statistics, Eurostat, Trading Economics calendar. Credit: ICE BofA indices via FRED, from my own pipeline. Onchain: Cointelegraph and Coinbase.

Weekly changes are measured against the levels published in edition #2. Analysis and personal opinion — never investment advice.

One piece of groundwork first, because everything below runs on it.

When a government spends more than it collects in taxes, it borrows the difference by selling bonds. A bond is an IOU: give me €100 today, I’ll pay you interest every year and return the €100 on a fixed date. The interest rate on that IOU is the yield, and a US government bond is a Treasury. The two-year is repaid in two years and mostly reflects what traders expect the central bank to do soon. The thirty-year is repaid in thirty and reflects something slower.

Now the week. Oil dropped about 8% on hopes of peace with Iran. The US economy grew 1.5% last quarter against a 2.1% forecast, and slower growth normally means less pressure on prices. Sure enough, the inflation measure America’s central bank watches most closely cooled as well. That combination almost always makes long-term borrowing cheaper.

On Wednesday the Federal Reserve held its main interest rate steady for the fifth meeting running, with three of its own officials voting for a rise. Chair Kevin Warsh declined to say what happens next.

The two-year yield fell, exactly as you’d expect. The thirty-year rose to 5.25%, the highest since 2007.

Short-term borrowing got cheaper. Thirty-year borrowing got dearer. In a week when every piece of news pointed the other way. The chapters below explain why, and what it costs you.

One more thing happened while I was writing: late Saturday night, President Trump called off a planned strike on Iran and said a framework for a deal had been agreed. That will move Monday’s open, and I come back to it at the end.

This week’s chapters

1. The bond market stopped listening — why long-term rates rose against the news
2. Japan came home — America’s most reliable lender is buying at home instead
3. What goes up too fast comes down — Korea, chips, and borrowed money
4. Dancing until the music stops — AI spending meets the cash register
5. Something is working — jobs held up, and a record in new businesses

The Scoreboard

Here is where markets closed on Friday, and how each moved over the week.

Before your eye lands on the numbers, look at the three American bond lines. The two-year fell while the ten-year and thirty-year rose. Everything else on the board moved more or less together. That disagreement is the story.

A basis point (bp) is one hundredth of a percentage point. A rising yield means dearer new borrowing and a lower price for bonds already issued. Closes: Asia 08:00, Europe 17:30, US 22:00 CET. Levels marked ~ are approximate.

Reading the board. America looks calm and wasn’t: the Nasdaq’s 1.6% covers six falling days into Wednesday, then a surge when Microsoft alone gained $450 billion in a single session.

Europe quietly had the best of it, with German shares leading and the Euro Stoxx 50 up 1.9%. The line marked BTP–Bund is the extra interest Italy pays over Germany to borrow for ten years, the standard gauge of nerves about the eurozone. At 81 basis points it sits near a fifteen-year low.

Asia was where the violence was. Korea’s KOSPI rose 17.9% on Friday, its biggest single day ever, and still ended the week down 1.4%. That tells you how bad Tuesday and Wednesday were.

1. The bond market stopped listening

Long-term borrowing costs rose against every piece of news this week, because lenders are charging extra for uncertainty rather than for inflation.

The Federal Reserve does not set long-term interest rates. It sets one rate — what banks charge each other overnight. Everything longer is set by investors buying and selling bonds, and when an investor decides what to demand for a thirty-year loan, they are pricing two separate things. Where will that overnight rate average over thirty years? And how much extra do I want for the risk that I’m wrong? Call the second part a nervousness fee.

Usually both move together. This week you could watch them come apart. Traders cut the odds of a September rate rise from around 80% to 63%, and the two-year yield fell seven basis points with them. The thirty-year went the other way, and after stripping out expected inflation, what lenders actually earn on it is now the highest since 2008.

Two things are feeding that fee. Warsh spoke forcefully about inflation on Wednesday and then held rates for the fifth meeting running, with no guidance on what comes next, and reports on Friday suggest he wants fewer scheduled meetings each year. Meanwhile American government debt passed $40 trillion — debt the government refinances roughly a third of every year, which makes it closer to a mortgage that resets than one fixed for the term. Market rates reach its interest bill in months.

The Fed has been cutting since 2024. The thirty-year yield is clearly higher than when those cuts began. A central bank lowering short rates while long rates climb is being overruled by the people who actually hand over the money.

What this means for you: the rate on a thirty-year mortgage is set by investors’ willingness to lend for thirty years, not by Fed announcements. That’s why headlines can say “the Fed cut rates” while your quote doesn’t move.

2. Japan came home

Japanese institutions have bought American government debt for decades. Rising interest rates at home are ending that.

For thirty years Japanese government bonds paid almost nothing, because the Bank of Japan held the ten-year rate near zero on purpose. So Japanese pension funds and insurers, sitting on vast savings and earning nothing at home, bought foreign bonds instead — above all American ones. Japan became the largest foreign owner of US government debt.

That is unwinding, faster than most people notice. The Bank of Japan dropped its cap in 2024 and raised its main rate to 1% in June. Japan’s ten-year yield now sits at 2.80%, a level last seen in the 1990s. This week the central bank held while warning that inflation might overshoot.

The consequence is simple. A Japanese insurer can finally earn a decent return at home, in its own currency, with no exchange-rate risk. So it stops buying American paper and brings the money back — $96 billion of it over the past three months, leaving holdings at $1.14 trillion, the lowest since April 2025.

Then there’s the yen, which had fallen to a forty-year low against the dollar. That makes everything Japan imports dearer, and on Thursday Tokyo stepped in, selling dollar reserves to buy back its own currency. It spent an estimated $53 billion in one day, the largest such intervention on record anywhere. Reuters reports America is now helping.

For all that, Japan’s ten-year yield finished the week one basis point lower than it started. A central bank meeting, a record intervention and a currency at forty-year lows moved it almost not at all, which tells you the pressure is structural rather than event-driven.

What this means for you: one of the most dependable buyers of American government debt is stepping back, exactly when America needs to sell more of it.

3. What goes up too fast comes down

Chip shares ran too far, Korean small investors bought the top with borrowed money, and the unwind ran automatically.

You’ve seen this shape before, even if you’ve never owned a chip stock. A sector runs hard for over a year. Money floods in near the peak, much of it through leveraged products, which multiply gains and losses two or three times over. Small investors, who by definition arrive after the good performance has already happened, take their biggest position at the highest price.

Then it turns. Chip shares worldwide fell 23.2% in July, their worst month since 2002. In Korea, where appetite for these products ran especially hot, ordinary investors had bought more than $60 billion of shares since April while foreign institutions sold over $70 billion, and borrowed money hit a record 38.6 trillion won in late June.

Then the market fell so fast on three consecutive days that trading halted automatically each time, something never seen before. Citi estimates more than 360,000 people were forced to sell everything, 62% of them under 35, with losses near $38.7 billion. Almost all of it happened without anyone deciding anything, triggered by clauses written into the contracts.

On Friday the finance ministry capped these products, foreign institutions bought a record amount as small investors sold a record amount, and the index jumped 17.9%. It still ended the week down.

The mechanism is worth understanding. Borrow to buy, and a falling price forces you to sell. Your selling pushes the price lower, which forces the next person out. Being right about the long term doesn’t help.

What this means for you: you can’t control whether a hot sector cools. You can control whether you’re forced to sell when it does. Borrowed money takes that choice away at the worst possible moment.

4. Dancing until the music stops

The four biggest cloud companies will spend three quarters of a trillion dollars on AI this year, and investors have started asking whether it comes back as cash.

In 2007 the boss of Citigroup said that as long as the music was playing, you had to get up and dance. The music stopped shortly after, and it did not end well.

The four largest cloud companies are still dancing. All four spent enormously this quarter, all four guided higher, and together they plan $720–745 billion of building this year. Nobody wants to be the one who sat down early and looked foolish.

What changed this week is where the strain showed. Microsoft justified it: its cloud business grew 43% and passed $100 billion in annual revenue for the first time, and the shares had the best single day any company has ever recorded. Amazon rose 15.6% on Friday telling the same story.

Meta went the other way. Record revenue of $60.8 billion, costs up 55%, and free cash flow down 91% from a year ago to $784 million. Free cash flow is what’s left after a company both runs itself and pays for what it’s building — the money that funds dividends and services debt. Two years ago these were the most cash-generating businesses on earth, and several are now scraping zero.

Companies that can’t fund a building spree from cash borrow instead. Around $400 billion of new borrowing is expected, and the cost of insuring these companies against default hit a record this week.

What this means for you: the AI trade started as a story about asset-light companies with enormous margins. It’s becoming a story about heavily indebted ones building warehouses of chips, and those two behave very differently when money gets tight.

5. Something is working

Jobs held up and record numbers of people are starting companies, and both deserve as much attention as the problems above.

I don’t want to leave you on the debt, and I don’t need to.

Each week America counts first-time filings for unemployment benefits, the fastest signal available on whether people are losing work. That number came in at 197,000, near its lowest in decades. The fear at the end of last year was an unemployment rate rolling over, and it hasn’t happened.

The second one I like more. Record numbers of new technology companies are being registered, and many are one or two people working from a bedroom. The barrier to starting a software business keeps collapsing.

There’s a link back to chapter four worth spotting. Enormously expensive building booms have rarely been solved by building more, but by someone finding a way to need less — cheaper extraction after an oil shock, better chips after a shortage. That someone usually works at a tiny new company, and there have never been more of those.

What this means for you: the boom and the correction can both be true. Expensive capital cycles routinely disappoint the investors funding them and benefit everyone who ends up using what got built.

The Week Ahead

Two events dominate, and around them sits the busiest week for government bond sales in months.

Monday 3 August

• US factory survey, 16:00 CET. A poll of purchasing managers where anything above 50 means expansion. Expected at 54.0 after 53.3. Read the prices component first: it was 73.0 last month and is forecast at 70, and that’s where July’s oil move shows up before it reaches anything else.

• US bank lending survey, 20:00 CET. Banks report whether they’re tightening standards on loans. It rarely makes headlines, but it’s the earliest warning that credit is getting harder to obtain, which matters a great deal given chapter four.

• US Treasury borrowing estimates, 21:00 CET. The warm-up for Wednesday.

• Eurozone factory survey, 10:00 CET, expected at 52.0.

  ---

Tuesday 4 August

• SpaceX first earnings as a public company, after the US close. It listed in June in the largest IPO in history and has since fallen roughly 45% from its peak. Two trading days later, up to 911.5 million shares held by employees and early investors become sellable — about $110 billion of stock arriving in a market where only 5% of the company trades freely. Musk’s own stake stays locked until June 2027.

• AMD earnings, after the close. The first large chip company to report since the sector fell 23% in July. Analysts expect revenue up 47% from a year ago, so the question is whether the business is still growing while the shares fall.

• Japan sells ten-year debt, 05:35 CET. The last auction cleared at 2.729%. Weak demand pushes Japanese yields higher and feeds straight back into chapter two.

• US job openings, 16:00 CET, expected at 7.25 million after 7.59 million.

  ---

Wednesday 5 August

• US Treasury refunding announcement, 14:30 CET. The most important scheduled event of the week, and almost nobody covers it. Treasury says how much it plans to borrow and at which maturities. With thirty-year borrowing at 5.25%, the split between cheap short-term bills and expensive long bonds tells you what the government itself expects to happen.

• US private payrolls estimate, 14:15 CET, expected at 75,000 after 98,000. A rough steer into Friday.

• US services survey, 16:00 CET, expected at 54.2. Services are roughly four fifths of the American economy, so this outranks Monday’s factory number by some distance.

• Germany sells ten-year and thirty-year debt, 11:30 CET.

• Japanese wage data, 01:30 CET, expected at 3.4% growth. Wages are what the Bank of Japan watches before raising rates again.

  ---

Thursday 6 August

• SpaceX share unlock. The shares described above become sellable.

• Japan sells thirty-year debt, 05:35 CET. The last one cleared at 3.993%, and Japan’s longest-dated bonds have been the most fragile part of that market all year.

• US weekly jobless claims, 14:30 CET, expected at 200,000.

• US unit labour costs, 14:30 CET, expected to jump to 2.7% from 1.8%. This measures what it costs an employer to produce a unit of output, and rising costs eventually reach prices.

• Eurozone retail sales, 11:00 CET.

  ---

Friday 7 August

• US jobs report, 14:30 CET. How many jobs America added in July, and the last major labour reading before the Fed meets on 16 September. Expected at 91,000 after a weak 57,000, with unemployment forecast to tick up to 4.3% from 4.2% and wages up 3.5% from a year ago.

• China trade data, 05:00 CET. Exports grew 27% last month, a figure few economists take at face value.

• US consumer inflation expectations, 17:00 CET, last at 3.7%. What ordinary Americans think inflation will be, and the number that decides whether the Fed’s credibility is holding.

Data Check

Every scheduled release comes with a forecast attached before it lands. Read the gaps rather than the levels — a number arriving exactly where everyone predicted moves nothing, because the price already reflects it.

Consensus is the median forecast from surveys of bank and research economists run by Reuters and Bloomberg, published free by Trading Economics.

Two deserve a second look. The eurozone grew faster than expected while inflation rose, which is why investors now fully expect the European Central Bank to raise rates twice more by early 2027.

And look at the oil storage number. American stockpiles fell by 7.17 million barrels when forecasters expected a rise of 1 million, which describes a market genuinely short of oil. The price fell 8% anyway. That tells you how much of July’s price was fear about the war rather than actual shortage.

The Onchain Pour

Bitcoin ignored a strong week everywhere else, which is the most interesting thing it’s done in months.

It held near $64,300 through a session in which Korea surged 17.9%, chip shares soared and the Nasdaq rallied, finishing the week down about 2% at $63,870, with ether at $1,890.

All year Bitcoin has moved like an excitable technology share, so sitting out a rally like that is a real change. It did move on the Fed decision, which suggests it’s tracking interest rates now rather than the stock market. Whether that holds is what I’ll watch in August.

Two developments matter more than the price. Circle won a limited banking licence from New York’s financial regulator. And Open USD launched — a stablecoin, meaning a token designed to always be worth one dollar, this one backed by more than 140 businesses including Visa, Mastercard and BlackRock. It launched on Ethereum, a public network anyone can build on, rather than a private chain of its own. The plumbing of the financial system is being rebuilt by the incumbents, in public, on open networks.

Last Drop

Something happened while I was writing this. Late Saturday night, Trump announced he had cancelled a planned attack on Iran, saying the outline of a deal had been agreed — one that would fully reopen the Strait of Hormuz and end Iran’s nuclear programme. Israel has joined the commitment, and mediators from Qatar and Oman met Iran’s foreign minister on Saturday. Nothing is signed, and as I write Iran hasn’t confirmed.

About a fifth of the world’s seaborne oil passes through that strait, and part of today’s oil price is simply payment for the risk it stays shut. If it genuinely reopens, that part disappears fast, and oil at $88 has a long way to fall.

Then watch what America pays to borrow for thirty years, because it faces a real test. Cheaper oil means less inflation, which normally means lower rates. This week that logic was ignored completely. If the thirty-year yield holds above 5.20% even as a peace deal arrives, you have your answer about what’s really driving it — and it isn’t the war.

See you next Sunday ladies & gents.

Sources

_{Scoreboard levels come from the Advisor Perspectives Treasury Yields Snapshot and CNBC for US yields, Yahoo Finance and CNBC for equity closes, Il Sole 24 Ore and ANSA for the BTP–Bund spread, Rigzone for Brent, Seoul Economic Daily for the KOSPI, Trading Economics Japan for the JGB, and CoinDesk for crypto. The 10-year Bund level is calculated from the Italian yield minus the published spread rather than reported directly. Market data as of Friday 31 July 2026. News and events to Sunday 2 August 2026, 09:15 CET.}

This was a week where the plumbing dictated everything. A thirteenth straight night of US strikes on Iran, plus Houthi attacks on two Saudi oil tankers in the Red Sea, sent Brent crude (the global oil benchmark) storming toward $100 a barrel by Thursday.

Higher oil feeds directly into headline inflation, and inflation is the one thing that keeps a central bank from cutting interest rates. So bond investors did the logical thing: they sold Treasuries, pushing the US 10-year yield to 4.70%, its highest since January 2025, and began pricing a real chance the Federal Reserve actually raises rates next week rather than cutting.

Rising yields make future company profits worth less today, and they landed at the exact moment two of the largest US firms spooked the market over how much they are spending on artificial intelligence. Alphabet and Tesla both fell hard Thursday, dragging the Magnificent Seven megacaps down by roughly $800 billion in a single session.

Friday brought relief: reports that Pakistan, backed by China, was trying to revive US-Iran talks knocked oil back below $96, letting stocks steady into the close. The S&P 500 ended the week almost flat, the tech-heavy Nasdaq around 2% lower, and the bond market walked away having quietly changed its mind about where the Fed is heading.

The Scoreboard

A basis point (bp) is one hundredth of a percentage point, so +15 bp means a yield rose from 4.55% to 4.70%. Yields and bond prices move in opposite directions: when a yield rises, the price of the bond you already own falls, and the cost of new borrowing for governments, companies and mortgage holders goes up. Equities, currencies and commodities are shown in percent. US equities and Treasury yields are the 22:00 CET close; European indices and the Bund settle earlier at 17:30 CET; foreign exchange and crypto are a fixed 22:00 CET snapshot. Levels marked ≈ are approximate where the official settlement was not yet confirmed.

Reading the Board

Equities split along a clear line. US large caps held up because strong company earnings offset the oil and rates pressure, leaving the S&P 500 barely changed. The damage sat in technology, where the Nasdaq’s 2% weekly drop came almost entirely from chipmakers and the AI-spending scare. Europe drifted lower as higher energy costs raised the odds of more rate increases from its own central bank.

Rates were the story. Both the 2-year yield (the market’s best summary of where the Fed is heading over the next two years) and the 10-year yield climbed together, a sign investors now expect tighter policy for longer. The German Bund, the euro area’s benchmark government bond, touched its highest level since 2011 for the same reason: oil-driven inflation forcing central banks toward the exit.

Foreign exchange stayed quiet by comparison. The dollar firmed slightly, helped by its role as a safe haven during Middle East conflict, and the euro slipped below $1.14, near its weakest in a year, as traders weighed Europe’s exposure to the energy shock.

Commodities were the pressure source. Brent’s near 9% weekly jump captures the entire chain of events, even after Friday’s pullback. Gold added a modest 0.8%, doing its usual job as insurance when geopolitics turns dangerous.

Crypto went nowhere fast. Bitcoin drifted just below $64,150 and finished slightly down, caught between improving internal demand and the same macro storm hitting every risky asset.

Three Brews That Mattered

1. Oil is now the Fed’s problem.
The mechanism is direct. When a barrel of Brent jumps roughly 30% above its pre-conflict level, petrol and diesel prices follow within weeks, and that shows up in the inflation numbers the Fed watches. A central bank cannot cut rates into rising inflation without losing credibility, so every dollar oil gains pushes rate-cut hopes further out and pulls a rate hike closer. That is why a war thousands of miles away moved your mortgage rate this week: the 10-year yield, which sets the tone for US home loans, rose because oil made a Fed cut harder to justify. Goldman Sachs flagged a “VaR shock” risk into the weekend, meaning the size of the rates move was large enough to force leveraged funds to cut positions to control their measured risk, which can feed on itself. Why it matters: the path of oil, more than any Fed speech, now decides the path of rates.

2. The AI bill is coming due.
Alphabet and Tesla did not disappoint on profits so much as on spending. Alphabet signalled capital expenditure (the money a company pours into data centres and chips) far above what analysts expected, with some estimates running toward $325–375 billion against a Street figure nearer $250 billion. Investors reacted by asking the uncomfortable question of when all that hardware starts earning its keep. The answer for now is later than hoped, which is why the Magnificent Seven shed around $800 billion on Thursday. The people who ultimately pay are shareholders, whose future profits are being reinvested today at the exact moment higher yields make those distant profits worth less. Why it matters: the market has started charging megacaps for AI ambition rather than rewarding it.

3. A jobs number rewrote the Fed math.
Weekly jobless claims, the count of Americans filing for unemployment benefits for the first time, fell to 187,000, the lowest in nearly 60 years and far below the 212,000 economists expected. A labour market this tight gives the Fed no reason to rush to support the economy, and every reason to worry that low unemployment plus rising oil keeps inflation sticky. Within hours, the probability of a July rate increase priced by futures traders jumped past one in three, from near zero only weeks ago. Why it matters: the Fed’s excuse to cut has evaporated, and the meeting on July 28–29 just became live.

Data Check

“Consensus” is the average forecast economists submit before a release. Markets move on the gap between the actual number and that expectation, not the number on its own.

The services survey was the standout, running well ahead of forecast and pointing to growth of roughly 2% on an annualised basis. One caveat worth keeping: S&P Global noted July activity was flattered by hospitality spending around the FIFA World Cup and the USA 250 anniversary, so some of the strength may fade. The European Central Bank left its main rate unchanged as expected, yet the message underneath was the harder part, with policymakers including Bundesbank chief Joachim Nagel warning that inflation risks from energy remain elevated.

The Onchain Pour

Bitcoin spent the week doing something quietly interesting while everyone watched oil. Its price sat close to its “realized price,” the average level at which all coins last moved on-chain, which acts as a rough cost basis for the whole market and often marks where committed holders step in. Long-term holders, wallets that have not sold in months, accumulated at the fastest pace in six years, a sign the strongest hands are buying weakness rather than selling it. The demand is not only retail: exchange-traded products that hold Bitcoin for investors have pulled in around $5 billion more than their gold equivalents since March, a genuine rotation from the old safe haven into the new one. Against that, real risks remain. Analyst André Dragosch called Bitcoin the “canary in the macro coal mine,” pointing to the Strait of Hormuz, rising yields and stress in the credit that funds AI data centres as the things that could still drag it lower, while fresh worries about quantum computing weighed on sentiment. On the policy side, the CLARITY Act, the bill that would finally define which US regulator oversees which crypto asset, lost some momentum after last-minute amendments, even as exchanges pushed the Senate to pass it. The setup is a market with improving foundations sitting inside a hostile macro backdrop, waiting to see which one breaks first.

Last Drop

Next week is the one that counts. The Fed decides on July 28–29 with a rate hike no longer unthinkable, and the numbers in this Scoreboard are the ones traders will be pricing off. Sunday’s Weekly Steep will go deeper on what a hiking Fed would mean for a government that has quietly turned itself into a floating-rate borrower, and why the bond market’s mood this week is the real signal to watch. Until then, keep an eye on the oil tape. It is running the show.