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Hedge Clippings | 4th of September 2026 This week: Domestically, Long bond yields broke multi-year ceilings this week, as Australia's GDP result complicated rather than clarified the RBA's task, and the one place investors actually found reward in reporting season was the part of the market nobody was watching. US 10 year yields hit a 3 year high, Japan's crossed 3% for the first time since 1996, and both moves share the same root cause Long bond yields broke through multi-year ceilings on both sides of the Pacific this week. The US 10-year Treasury rose from 4.65% on 29 August to a three-year high of 4.818% on 3 September, before easing to around 4.74% overnight on dovish Fed commentary. Japan's 10-year JGB climbed from 2.83% to 3.02%, crossing 3% for the first time since 1996, before a strong 30-year auction steadied the market. Two forces are driving both moves. The first is fiscal and monetary. In Japan, concern is building around the Takaichi government's expansionary stance, while US Treasury Secretary Bessent reportedly told Bank of Japan Governor Ueda that Washington wants Japan to raise rates further. In the US, the implied probability of a rate hike next week after the FOMC meeting on 15th and 16th jumped from around 33% before Fed Chair Kevin Warsh's 28 August Jackson Hole speech, to 66% immediately after. The second is structural. Nomura chief macro strategist Naka Matsuzawa argued that AI hyperscalers' willingness to borrow at higher rates is lifting yields more broadly. An estimated US$1.5 trillion of AI-related corporate debt has been issued this year, competing with sovereign borrowing for capital, while core PCE inflation remains at 3.7%, well above the Fed's 2% target. The odds for a FED hike were around 63% to 66% before reversing sharply overnight as Fed Governor Christopher Waller said he would support holding rates steady if inflation continued to ease, sending CME FedWatch odds down to 50.4%. The next major test is tonight's August non-farm payrolls report, with about 56,000 jobs expected and unemployment forecast to remain at 4.1%. The US$730 billion hyperscaler capex story covered a fortnight ago and this week's bond sell-off are increasingly the same story. With a named strategist now linking AI borrowing directly to higher yields, the pressure looks structural rather than cyclical, meaning it may persist beyond the current rate cycle. That makes tonight's US payroll figures more consequential for Australian portfolios along with the RBA upcoming deliberations. Australian GDP beat forecasts, real wages are back to 2011 levels, and insolvencies are still running well above pre-pandemic norms The ABS Q2 National Accounts, released on Wednesday, showed GDP rising 0.4% for the quarter and 2.1% annually, above consensus forecasts of 0.3% and 1.8%, but below Q1's 2.5% annual pace. The composition was more hawkish than reassuring. Household consumption rose just 0.4%, with the ABS noting continued caution as higher Middle East-driven fuel and travel costs weighed on spending, while mining exports and government expenditure supported the headline result. Domestic cost pressures also remained firm: the final demand deflator accelerated from 0.5% to 0.8% and real unit labour costs rose 0.9%. Multiple economists concluded that another RBA hike could come as soon as this month. That sits uneasily beside the wages data. The June quarter Wage Price Index rose 3.2% annually, below headline CPI of 3.8% and trimmed mean inflation of 3.6%, leaving real wages lower for a third consecutive quarter. Economist Bill Mitchell estimates real wages are now 6.4% below their June 2020 level and back to their September 2011 purchasing power. Most of the decline occurred in 2022 and 2023, but recent quarters have extended it. Construction captures the tension most clearly. Despite persistent skills shortages and repeated RBA concern about capacity constraints, real wages in the sector are falling while insolvencies remain elevated. ASIC recorded 14,152 company insolvencies in FY2025-26, down from 14,722 in FY2024-25 but still around 73% above the pre-COVID baseline of roughly 8,200. Construction remained the largest contributor, with 3,472 external administrations on ASIC's Series 1 count to 9 August, although that was 3.4% lower than the prior year. Bathla's well documented woes won't assist unless an unlikely rescue package eventuates. Reporting Season: While large caps went nowhere, small caps had their best reporting season in years: our conversation with Cyan's Dean Fergie
One example he gave was Janus Electric Holdings (ASX: JNS), which has risen from 20 cents at a capital raise backed by Cyan to a 52-week high of 67 cents and a market capitalisation of about ~$100 million. The company reported FY2026 revenue of $1.7 million but is targeting roughly $50 million, with the investment case centred on converting diesel truck fleets in California to exchangeable battery power under supportive state incentives. Another holding, BLS Pharmaceuticals (ASX: BLS), increased revenue about 150% from $29.3 million in FY2025 to $75 million, alongside roughly $20 million of EBITDA. Despite weak consumer confidence, higher rates and bond yields, the Middle East conflict and falling property prices, Fergie argues small caps can still provide company-specific opportunities: "That's the beauty of small caps, you can look anywhere for businesses that can perform even in a bad economy." News | Insights Manager Insights | Cyan Investment Management Property Update | Australian Secure Capital Fund July 2026 Performance News |
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