2026-08-13 Thursday

The Climate Prediction Center issued an El Niño Advisory on August 13, 2026, with a greater than 90% chance of a very strong event during the Northern Hemisphere fall and winter 2026-27. Sea surface temperature anomalies exceeded +2.0°C in the eastern equatorial Pacific, with July Niño index values of +1.4°C in Niño-3.4, +1.7°C in Niño-3, and +2.9°C in Niño-1+2. The CPC also notes a 69% chance of a historic event exceeding the strength of previous El Niño events since 1950 during October-December 2026.

The Central Bank of the Dominican Republic reported annual inflation of 5.47% in July 2026, above the target range of 4.0% ± 1.0%, with core inflation at 4.96%. The monetary policy rate was set at 5.25% in August, and gross international reserves reached $15,253.0 million, while the current account deficit improved to -1.2% of GDP in 2025. Cumulative inflation stood at 2.21% and monthly inflation at 0.19%.

A Federal Reserve FEDS Note analyzes the private credit (PC) and leveraged loan (LL) markets, each about $1.4 trillion as of end-2025, together accounting for roughly 45% of lending to private nonfinancial corporations. PC borrowers are smaller (median revenue $223 million vs. $902 million) and more leveraged (5.0x debt/EBITDA vs. 3.2x), with PC loans typically smaller ($20 million vs. $275 million). The note finds that larger firms can substitute between markets, while smaller firms are more dependent on private credit.

German federal securities yields have risen significantly over the past year, with the overall yield reaching 3.12% in July 2026, up from 2.56% a year earlier. On August 11, 2026, the 10-year yield stood at 3.20% and the 30-year at 3.69%. Yields varied by maturity, with the 5-year federal obligations at 2.90%, 10-year federal bonds at 3.16%, and 30-year federal bonds at 3.65% as of July 31.

The euro area economy has shown resilience to the energy shock from the Middle East conflict, with inflation falling to 2.8% in June and activity returning to pre-conflict levels. The ECB kept rates unchanged at 2.25% in July, and US tariffs are seen as a headwind rather than a major storm. This resilience reduces the urgency for further ECB rate hikes, which would otherwise pressure bond yields. The story is under the radar because it is a macro update that lacks a dramatic catalyst, but a clear signal would be if inflation deviates from the 2.8% reading or if the ECB signals a shift in its stance.

A Bank of England study finds that negative earnings news from the 'Magnificent 7' US tech firms transmits globally, causing equity indices to fall, credit spreads to widen, and the US dollar to depreciate, with muted Treasury yield responses, suggesting limited flight-to-safety dynamics. Using daily shocks around earnings announcements from 2000 to 2025, a -1% Mag-7 equity price shock leads to a nearly 2% decline in the S&P 500 and a 1% fall in the FTSE 100 within two days, while US and UK 10-year yields initially fall a few basis points but later rebound.

The German federal government rejected UniCredit's offer to exchange shares in Commerzbank, citing lack of an appropriate premium and supporting Commerzbank's independence. This decision affects the future of Commerzbank and the German banking sector. The rejection removes a potential catalyst for banking consolidation in Europe, which could have improved efficiency and profitability. It also signals that the German government prioritizes national control over foreign ownership, which may deter cross-border M&A in the sector. This is under the radar because it is a specific corporate action, but a signal to watch is whether UniCredit returns with a higher bid or whether other foreign banks attempt similar moves.

The CSSF reported that total net assets of Luxembourg UCIs, SIFs, and SICARs reached EUR 6,731.325 billion as of June 30, 2026, up from EUR 6,634.393 billion in May. It also highlighted recent publications on CRD VI transposition and ESMA's Common Supervisory Action on risk management for UCITS and AIFMs. The growth in fund assets indicates continued investor appetite for Luxembourg-domiciled funds, which supports the country's financial sector and its contribution to public finances. This is under the radar because it is a routine monthly update, but a signal to watch is if the growth rate accelerates or decelerates significantly, which could reflect broader market sentiment.

A Dallas Fed working paper uses the 2026 Iran War as a natural experiment to show that the short-run U.S. oil supply elasticity is effectively zero, contradicting higher estimates. The war removed about 15% of global supply via the Strait of Hormuz closure, spiking WTI from $61 to $115, but U.S. shale output could not respond within a month. This implies that oil price shocks are more persistent and inflationary than previously thought, which could force central banks to tighten policy more aggressively, raising bond yields. The finding is under the radar because it is an academic paper, but a concrete signal would be if the Fed or other central banks cite this study in their policy deliberations.

A BIS report highlights that the Middle East conflict has raised energy and fertiliser prices, weakening growth and intensifying fiscal pressures in Africa, where public debt and debt service burdens remain high. Shifting to domestic currency debt has reduced exchange rate risk but increased debt service costs and rollover risks. The report notes that higher interest rates and shorter maturities have increased debt service costs and rollover risks.

The National Bank of Georgia reported that total international reserves exceeded 7.5 billion US dollars, reaching a historical maximum, and launched an analytical platform for economic data and an interactive inflation report. The IMF noted that reserve accumulation strengthened confidence in financial markets. Higher reserves reduce the risk of a balance-of-payments crisis, which supports the value of Georgian debt and lowers sovereign risk premiums. This is under the radar because Georgia is a small emerging market, but a signal to watch is whether the reserves continue to grow or if the IMF's endorsement leads to improved credit ratings.

UK and EU markets will move to a T+1 settlement cycle on 11 October 2027; the FCA warns that some firms are significantly behind and may face regulatory action, while ESMA urges finalisation of preparations. The SEC is simultaneously implementing mandatory clearing for U.S. Treasury cash transactions by December 31, 2026, and repo transactions by June 30, 2027. The FCA has reformed UK equity market transparency with a framework for a future consolidated tape and cut transaction reporting costs by over £100 million annually by reducing reporting fields from 65 to 52. The FCA, Bank of England, and PRA introduced a new oversight regime for critical third parties providing technology and data services, and the FCA's Scale-up Unit admitted ClearScore, Modulr, Teya, Urban Jungle, and Zilch for tailored support. The regulator's 2025-30 strategy focuses on rebalancing risk to spur growth, investing in technology, and expanding globally.