Global bond rout drags stocks lower for a third straight day

Good morning. Bonds, not stocks, were the main character yesterday. US, Japanese, British and German government debt all sold off together, pushing yields to their highest since 2008. Japan's 10-year yield hit 3.0%, a 30-year high.

The spark was the Strait of Hormuz again. Two supertankers carrying Saudi crude were attacked on Monday night, and US forces struck Iran in response. Pricier oil revives inflation worries, and that pushes yields up. The US 10-year hovered around 4.8%, its highest since Trump took office. Some argue the bigger drivers are swelling government debt and Big Tech's AI borrowing rather than inflation itself.

Stocks got squeezed. The Dow fell nearly 0.8% for a third straight losing day and slipped below its 50-day moving average, a widely watched technical line. Oddly, the VIX sits near a one-year low, and firms like Schwab read that calm as a warning sign and suggest hedging.

At the Fed, the odds of a September hike have passed 50%, and Governor Barr said he would back a hike if inflation does not ease. Eurozone inflation also hit 3.3% in August, a three-year high, making a hike from the ECB next week more likely.