Embrace the pessimism

The journalists and economists are at it again, trying their best to use ‘last month’s’ news to scare their readers, investors and clients.

The emphasis is that it’s news. They are only reporting what has already happened.

Firstly, not many (if any) of these pundits take risk, let alone invest their own money or do so for anyone else. Ahhh… the safety of the ivory tower and a salary.

Secondly, the headline of Australian consumer confidence being at 30-year lows is incorrect.

https://www.afr.com/policy/economy/consumer-confidence-plunges-to-30-year-low-after-rba-rate-rise-20261006-p61389

Thirdly, professional investors see extremes in pessimism as a moment to increase exposure to ‘risk’.

Fourthly, what does such pessimism in consumer confidence translate to when looking at the stock market?

October 6, 2026

Interest Rates have a new base

The two tales I am telling about interest rates and the cost of money are 1) that in the nearer term, I expect rates to trade sideways to slightly lower (see digestion and consolidation) but 2) in the longer term, they are settling in and working their way higher from a base than seen over the past 15-18 years.

I am seeing ‘shapes’ in interest and inflation rates, last observed in 1965.

Here is a picture of the U.S. 30 year mortgage rate.

October 6, 2026

3rd time in 30 years for Euro 30 year yield

Following up on this post from a couple days ago,

https://robzdravevski.com/2026/10/04/watching-eurozone-inflation/

The attached study shows an overbought and stretched EU30Y and how it portends a peak in the Euro Stoxx 50

October 5, 2026

Junk yields inverse relationship with equities

Perversely, when junk yields are trading at ‘high’ extremes over government paper, it’s time to buy equities.

The study below shows you times when the spread of junk is trading at ‘lows’, it’s time to consider having one foot out of the equity party.

October 5, 2026

1.4% above another government bond isn’t ‘junk’

I’ve seen some quips about French 10 bond yields trading at a spread above German 10’s that the French debt is to consider “junk”.

That’s not the case.

You can buy French 10’s and Short German 10’s, should you want a pair trade to take advantage of the extreme which I can see….

but I think a government 10 year bond yield from one country would need to trade at least 4% above another government bond yield before I’d start categorising it as ‘junk’.

October 4, 2026

Macro Extremes (week ending October 2nd, 2026)

A weekly Macro, Cross Asset review of prices trading at extremes which may generate future investment ideas and opportunities.

The following assets, on a weekly timeframe, either registered an Overbought or Oversold reading and/or have traded more than 2.5 standard deviations above or below their rolling mean.

NB: Pricing of commodity futures contracts considers only the immediate front-month contract.

* denotes multiple-week inclusion.

Extremes Above the Mean

At least 2.5 standard deviations above the weekly mean

U.S. High Yield Bond Option Index
Norwegian 10-Year Government Bond Yields *
JPY/AUD
USD/CHF
USD/DKK
USD/MXN
USD/SEK

Overbought

RSI > 70

Japanese 2-, 5- and 10-Year Bond Yields *
Indian, Italian and Portuguese 10-Year Government Bond Yields *
U.S. 3-Month Bill and 2-Year Bond Yield
U.S. 5-Year Bond Yield minus 5-Year Inflation Breakeven Rate Spread *
U.S. 5-Year Bond Yield minus U.S. Inflation Rate
North American Hot Rolled Coiled Steel *
Sugar
Rice *
Taiwan’s TAIEX Equity Index *
Poland’s WIG Index *

The Overbought Quinella

Both Overbought and >2.5 standard deviations above the weekly mean

U.S. 5–7-Year Corporate Bond Yields *
U.S. BB High Yield
Belgian, Chilean, Spanish, French & Greek 10-Year Government Bond Yields *
TBT & TBX
U.S. 3-, 5-, 7-, 10-, 20- & 30-Year Bond Yields *
U.S. 5-Year Bond minus 3-Month Bill Yield Spread
U.S. 10-Year minus Australian 10-Year Bond Yield Spread *
U.S. 10-Year minus Eurozone 10-Year Bond Yield Spread
U.S. 10-Year Bond Yield minus 10-Year Inflation Breakeven Rate Spread *
U.S. 10-Year divided by Australian 10-Year Bond Yield
U.S. 30-Year Mortgage Rate

Extremes Below the Mean

At least 2.5 standard deviations below the weekly mean

EUR/JPY
EUR/USD
CAC 40 Index
Russell 2000
KLSE
S&P MidCap 400
PSE Equity Index
Türkiye’s BIST Index *

Oversold

RSI < 30

Lean Hogs
China CFR Iron Ore
SENSEX Equity Index

The Oversold Quinella

Both Oversold and >2.5 standard deviations below the weekly mean

Australian 10-Year minus U.S. 10-Year Bond Yield Spread
IEF & IEI *
SHY & TLT *
CLP/USD
NIFTY Equity Index

Notes & Ideas

Government Bond Yields Mostly Fell

Various 10-year bond yields left overbought territory, and some streaks came to an end.

While others remain, a number of streaks have developed which help identify where the more interesting extremes are emerging.

Chilean 10-year bond yields have climbed for 4 weeks.

U.S. 10-year yields have closed higher for the past 5 weeks.

The U.S. 10-year minus 10-year inflation breakeven rate spread is in a 6-week winning streak.

Indian 10-year yields have risen for 7 weeks.

U.S. 5–7-year bond yields have risen for 8 weeks.

Belgian, Spanish, French, Greek, Italian and Portuguese 10-year yields have risen for 8 consecutive weeks, as have U.S. 5s and 7s.

The last time we saw an 8-week bond-yield winning streak was in August–September 2022.

The U.S. 30-year minus 10-year yield spread rose and snapped a 6-week losing streak.

SHY ETF has fallen for 6 weeks, while the IEI ETF has closed lower for the past 7 weeks.

Equities Were Weaker

The KBW Banks Index, KRE Regional Banks, Russell 2000, IDX, PSE, Hang Seng and HSCEI are in 4-week losing streaks.

Saudi Arabia’s Tadawul, the South Africa 40, ASX 200, ASX Materials and ASX Industrials have fallen for the past 5 weeks.

Transports and the S&P SmallCap 600 rose and broke 6-week losing streaks.

The CSI 300, China A50 and SENSEX are in 8-week losing streaks.

ASX Industrials rose and snapped 4 consecutive weeks of losses.

Commodity Prices Were Mostly Weaker

Thermal Coal, Steel, Coffee, Sugar and Gasoline were the notable gainers.

Aluminium, Copper, Lithium, Precious Metals, Corn and Nickel were amongst the largest decliners.

Lean Hogs returned to oversold territory.

Lithium Carbonate, Palladium and Wheat have fallen for 5 weeks.

Arabica Coffee rose and snapped a 5-week losing streak.

Lithium Hydroxide has sunk for 6 weeks.

Naphtha crack spreads rose and snapped 8 consecutive weeks of decline.

Gasoil has fallen 10% in the past two weeks.

Currencies Were a Little More Active

The Aussie and Loonie eased, again.

The Euro was notably weaker.

The Yen and British Pound were stronger.

AUD/USD, CAD/USD, EUR/USD and THB/USD have declined for 4 weeks.

NZD/USD, CHF/USD and CLP/USD have fallen for 6 weeks.

The latter registered its first oversold reading in three years.

The USD has risen 4 weeks in a row against the DKK, SEK and ZAR.

The Week’s Larger Advancers

The larger advancers over the past week comprised Richards Bay Coal +3.6%, Rotterdam Coal +4.6%, Lean Hogs +1.6%, HRC +3.1%, Arabica Coffee +3.6%, Newcastle Coal +2.8%, Gasoline +3.9%, Robusta Coffee +3.6%, Sugar +13.9%, Dutch TTF Gas +4.0%, Naphtha Crack Spread +15.3%, Bovespa +4.7%, Nikkei 225 +2.9% and the Philly SOX Index +3.7%.

The Week’s Larger Decliners

The group of largest decliners for the week included Australian Coking Coal −5.6%, Aluminium −7.2%, Bloomberg Commodity Index −2.0%, Baltic Dry Index −8.1%, Brent Crude −2.0%, WTI Crude −1.4%, Cotton −4.6%, Palm Oil −2.9%, Copper −3.2%, Lumber −2.1%, JKM in Yen −3.1%, LTC −6.9%, LTH −10.4%, Natural Gas −5.0%, Nickel −4.5%, Orange Juice −10.5%, Palladium −8.1%, Platinum −4.7%, CFR China Iron Ore −5.9%, Urea −4.4%, Gasoil −7.3%, Silver −6.1%, Gold −2.1%, Corn −5.8%, Oats −2.9%, Soybean −3.1%, Wheat −2.9%, Gasoil Crack −20.1%, Heating Oil Crack −14.0%, Gasoline Crack −6.3%, CSI 300 −1.8%, All World Developed ex USA −1.6%, ATX −3.3%, KBW Banks −2.8%, BUX −7.4%, CAC −2.2%, China A50 −3.0%, IDX −3.3%, DJ Transports −1.3%, FCATC −4.4%, Tadawul −1.7%, MIB −2.7%, HSCEI −1.7%, IBB −2.1%, IBEX −3.1%, KLSE −2.4%, NBI −1.9%, NIFTY −3.1%, Helsinki −1.6%, PSE −3.4%, PSI −3.0%, PX −3.9%, SA40 −2.3%, SET −2.2%, SMI −2.0%, IGPA −2.9%, FTSE 100 −2.2%, Vietnam −2.7%, BIST −4.9% and Poland’s WIG −1.8%.

October 4, 2026
By Rob Zdravevski
rob@karriasset.com.au

Watching Eurozone inflation

For Allocators, consider watching the Eurozone Inflation Rate as it is close to registering a signal to lighten weighting to the Euro Stoxx 50.

It could be the 5th such signal in the past 30 years

October 4, 2026

Newsletter: Own What Can’t Be Easily Replaced

My latest newsletter can be viewed at the link below

https://mailchi.mp/karriasset/own-what-cant-be-easily-replaced

Reading The Tape: Life360 (360:ASX)

Part 1: Parabola’s honour mean reversion, more than most.

Part 2. In this stocks case, I think it goes much lower.

Currently it’s A$19.19

October 1, 2026