Morning Bid: The dog days are over

European markets face an autumn fraught with uncertainty as gas prices surge to 3-1/2-year peaks while stocks plummet to their lowest levels in over a decade. The looming threat of a harsh winter looms large, with a backwardation in gas contracts leaving traders uncertain about future demand. Bond markets have also endured a summer of disappointment, with Bund futures hitting 15-year lows in Asia and OAT futures plummeting to their lowest point since their debut in 2012.

French and German yields reached alarming 15-year highs, prompting speculation of an imminent European rate hike. Meanwhile, the U.S. continues to engage in a tit-for-tat war with Iran, with President Trump vowing further strikes against the Islamic Republic in retaliation for the latest exchange of fire. The global bond market is also experiencing a sharp rise in yields, with the 10-year Treasury yield hitting a 20-month high in Tokyo and Japan's benchmark 10-year reaching 3% for the first time since 1996.

Despite the bleak outlook, some analysts argue that the surge in global bond yields may be a sign of improving economic prospects, as real yields are rising, driven by better growth expectations. However, the situation remains precarious, with term premia reaching alarming levels, and investors bracing for a challenging winter ahead.

Tuesday's economic calendar features key data releases, including Euro zone CPI, U.S. JOLTS, and ISM Manufacturing data, which could provide further insight into the state of the global economy.