This is a market that isn’t impressed with talking but will pay attention to rates and oil. So, with 3.12% key for 10-year U.S. Treasury rates, one has to watch oil  at $72.50 for more trouble, writes Bob Savage Tuesday.

Another day of lackluster news but with a myriad of central bank speakers. Their palaver dominates into the FOMC.

Rates may not yet matter but they are higher, and this will glacially move the mountains of risk capital. Just as talking eventually makes forward guidance less powerful, so too, higher rates makes debt less acceptable.

The key turning point for markets wasn’t last night but yesterday with ECB Draghi hawkish enough to push up yields in Europe. His 2% CPI target sounded at risk – and given the rise of oil – perhaps justified.

Of course, today appeared to also be about the number 2:

• BOJ Kuroda unlikely to move before 2% CPI. There is no set period for easy policy.
• China less than 2% chance for a US trade deal. China’s Vice Commerce Min suggested that it is hard to progress in the U.S. trade talks with a knife to the neck. A new white paper argues that the U.S. has not shown enough respect and has imposed unilateralism, protectionism and economic hegemonism on various countries, especially China.
• Italian budget merges to 2% compromise. A report from Il Messaggero that Fin Min Tria is willing to run a deficit as high as 2.0% of GDP (vs. his stated 1.6% preference), while another report from La Stampa cited 5-Star`s Di Maio backtracking from a 2.8% of GDP deficit.
• BOE Vliehe: two hikes a year about rate. Doubts impact of unwinding QE significant, more about forward guidance.
• Take 2 for US/Turkey talks over pastor Andrew Brunson. The Turkish lira (TRY) continued to rally from yesterday’s Pompeo suggestion for more talks with Turkish leaders.

The biggest talking today will be at the UN where President Trump tries to convince world leaders that America First doesn’t mean America Alone. He has penned a free-trade deal with South Korea and hopes to do the same with Japan after his Abe meetings.

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