Traders are cutting risk and global interest rates are ratcheting higher as investors sell long-duration instruments this morning, suggesting that a relatively calm summer in financial markets is quickly coming to a rude end. Treasury yields are climbing across the end of the curve, equity futures are retreating ahead of the North American open, and the dollar is surging against all of its major rivals as a series of idiosyncratic events unleash turbulence across fixed-income markets.

30-year UK gilt yields are holding near their highest levels since 1998 on reports suggesting that chancellor Rachel Reeves is struggling to find fiscal savings ahead of her Autumn Budget. In France, spreads over German bunds are widening as Prime Minister Francois Bayrou is expected to lose a no-confidence vote next Monday, bringing down the government and again derailing any serious attempt at fixing government finances. Japanese rates are climbing on news that Liberal Democratic Party Secretary Hiroshi Moriyama intends to resign, threatening to undermine Prime Minister Shiguru Ishiba’s leadership. And Donald Trump’s attacks on the Federal Reserve are eroding the central bank’s credibility, adding to the term premia built into long-term Treasury yields.

But long-term borrowing costs are marching higher across all major developing economies, suggesting that bigger structural tectonic plates are shifting beneath the financial markets. Tariff-driven trade tensions are lowering the world’s economic efficiency, forcing producers and consumers alike to brace for more inflation and further disruption. Long-standing demographic headwinds—most notably aging populations—are steadily eroding the pool of domestic savings available to finance massive levels of public debt, nudging real yields upward. At the same time, the post-pandemic retreat of the so-called global “saving glut”—once fuelled by surpluses in Asia, oil-exporters, and other emerging economies—is drying up a reliable source of cheap capital for advanced economies, forcing them to offer higher yields to attract funding. In short, yield may be rising not solely because of regional political dysfunction, but because the broader ecosystem has shifted: worsening economic efficiency, aging societies, and weaker global savings all demand greater remuneration for locking in capital over the long haul.

Encouraging trade developments are doing little to lift market sentiment. On Friday, a federal appeals court upheld an earlier ruling that found most of Donald Trump’s global tariffs were illegally imposed, but left the levies in place until October 14th to allow the administration to take its appeal to the Supreme Court. Should an injunction be granted before the justices take up the case—potentially in early 2026—tariff collections could persist at current levels for many more months, offering scant relief to embattled importers, even if the president is ultimately forced to use other, less flexible legal avenues.

Trading in the holiday-truncated week ahead will be tightly focused on the US, where a heavy slate of data releases will be parsed carefully for insight into whether the real economy is beginning to accelerate out of its early-year slump. Today brings the August factory activity index from the Institute for Supply Management, followed tomorrow by the July Job Openings and Labor Turnover Survey and the Fed’s latest Beige Book. On Thursday, markets will digest the weekly jobless claims report alongside an update on services-sector activity. If economic data keeps surprising to the upside—as it often does around this time of year—investors could begin dialling back expectations for the Fed’s easing trajectory, temporarily unwinding some of the dollar’s year-to-date losses.

But Friday’s non-farm payrolls report could prove enormously consequential, carrying the potential to upend prevailing market trends and set the near-term course for interest rates and the dollar. Layoffs remain subdued and unemployment duration has yet to surge, suggesting that tighter border controls and stepped-up deportations are helping contain upward pressure on jobless rates. Yet last month’s figures showed job creation slowing sharply, with average monthly gains falling to just over 35,000 in the three months through July, while the Conference Board’s ‘labour market differential’—the gap between the share of consumers seeing jobs as plentiful versus hard to find—slid to a post-pandemic low, underscoring waning demand for workers. A payrolls print well below 70,000, particularly if accompanied by a rise in unemployment, could strengthen expectations for back-to-back Fed rate cuts through the autumn and winter. Conversely, a stronger-than-expected outcome might derail hopes for an aggressive easing cycle, pushing yields and the dollar higher.

*We think economy gravity will reassert itself later in the year, but as John Maynard Keynes put it, “anticipating the anticipation of others,” is a critically important skill in financial markets, and it seems as if the narrative is currently pivoting toward a more optimistic view on underlying conditions in the US.