5 Things You Need to Know to Start Your Day

Good morning. Turmoil from a global bond market selloff, a power struggle in US Congress and the risk of the biggest healthcare strike in US [View in browser]( [Bloomberg]( Good morning. Turmoil from a global bond market selloff, a power struggle in US Congress and the risk of the biggest healthcare strike in US history. Here’s what’s moving markets. Treasury turmoil The selloff in global markets has gathered pace and [yields on 30-year Treasuries hit 5%](, the highest level since 2007, as traders brace for an extended period of elevated interest rates. German 10-year yields [reach the highest level since 2011]( too as the Treasury moves rippled across markets. Investors are demanding greater compensation to hold onto long-dated debt with rates set to remain higher for longer, while concerns about Treasury issuance to address rising budget deficits are also weighing. Power struggle Congress has been plunged into an internal power struggle after Republican Kevin McCarthy became the first House Speaker [to be ousted from the position](. The loss of his post came as lawmakers face a series of key deadlines to avoid a government shutdown and to approve aid for Ukraine, all of which is happening as the US heads towards a presidential election next year. Health strike More than 75,000 healthcare workers at Kaiser Permanente are preparing for what would be the [largest strike in the sector in US history](, with talks between the company and a coalition of employee unions yet to produce a resolution. It could interrupt health services for nearly 13 million people and follows a string of high-profile labor disputes in the US, most notably strikes by the United Auto Workers and Hollywood actors and writers. Bonds cool The moves in Treasuries have cooled as the session has progressed and the earlier dollar strength has dissipated too. S&P 500 and Nasdaq 100 futures are still pointing slightly lower. [Oil is declining](, with WTI slipping further below the $90-per-barrel mark, ahead of an OPEC+ review due on the global crude market. Coming up… US factory orders and ADP employment data will top the economic agenda, the latter in particular following yesterday’s [JOLTS survey](. Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman are both set to speak. What will US retailers say about the American consumers as they report quarterly earnings? How will soaring Treasury yields impact the S&P 500 through the rest of the year? Is lower inflation a good or a bad thing for corporate profits? Share your views in the latest [MLIV Pulse survey](. What we’ve been reading This is what’s caught our eye over the past 24 hours. - The paper documents [keeping global trade afloat](. - A leaner Sam Bankman-Fried [shows up to court](. - Paris has a [bedbug problem]( ahead of the Olympics. - US-China relations on the [“brink of red lines,’’]( Dalio says. - [“Gobsmackingly bananas”]( European heat wave. - A [beer-serving robot company]( is set to IPO in Korea. - Apple picks up [a downgrade](. And finally, here's what Joe’s interested in this morning During the 2010s, it seemed like almost any piece of news or policy decision ended up pushing rates at the long end down. If a jobs report came in weak, that was seen as a negative for the economy and long rates went lower. If a jobs report came in strong, then that would be seen as an indication that the Fed might hike rates sooner. And the rate hikes would slow the economy and that would have the effect of pushing long rates lower. Maybe this is a little exaggeration, but this was basically the regime. The 2020s so far is the opposite of the 2010s, and the dynamic is such where it's not obvious what types of catalysts push rates lower. A possible trigger for the latest rate move is the recent September FOMC meeting, where the 2024 dots moved higher. The Fed indicated that it was less inclined to cut rates imminently, and again, rates moved higher across the curve. Meanwhile, because inflation is still elevated, if the Fed were to be seen as cutting or pausing prematurely, that could also be seen as an accelerant... pushing rates higher. Again, somewhat speculative. But this seems to be the market we're in for the moment. Any piece of news is seen as a reason for rates to go higher. Yesterday maybe it was August job openings -- which came in much higher than expected -- that did it. Anyway, depending on what world your brain occupies -- markets or politics -- you'd get a different answer for what the biggest news of the day was yesterday. Was it rates shooting up again? Or was it the ouster of Kevin McCarthy as speaker? Probably for most people, McCarthy was the bigger news of the day Incidentally, the proximate cause of McCarthy's ouster is the recent agreement to keep the government open for another 45 days, which is a spending decision. And a spending decision is potentially a rates story. So the two are kind of connected. I mean, they're not that tightly linked. McCarthy didn't lose his job because a handful of members of his caucus lost confidence in him due to the 10-year hitting 4.8%. But on some level, it's all part of the same brewing narrative. Political dysfunction. Fiscal dysfunction. Massive deficits. Higher rates. It all kind of swirls together. I've mentioned it a couple of times before, but there have been times in the past where there was a tacit agreement between fiscal policymakers and the Fed to trade deficit reduction for lower rates. Obviously it's for other people to decide whether fiscal tightening is an important or necessary ingredient for getting rates lower. But right now it's hard to imagine any sort of fiscal consolidation caucus emerging. At least with this current political makeup. There are ostensibly politicians who make noise about deficits and debt. And some of them may have even had a role in ousting the Speaker. But the gap between this noise, and something constructive on the fiscal front seems massive. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. 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