The yield on the 10-year Treasury note added about three basis points in New York and another two in Tokyo trading, to around 4.77%, after the United States and Iran exchanged strikes over the weekend for the first time in about a month.
Most readings of a war premium in oil treat it as a drag on growth. Adam Coons reads it as pressure on the Federal Reserve to raise interest rates rather than cut them, and he thinks the central bank will put that decision off as long as it can.
"You know, I don't know that it's a safe bet that we'll get rate increases. I think it's an absolute growing probability."
Coons is the chief investment officer at Winthrop Capital Management, and he had made the food-price argument on this program months before crop prices moved in August.
I listened to the full segment so you can skip it.
Here are the 6 takeaways that matter.
👤 Guest: Adam Coons, chief investment officer at Winthrop Capital Management, where he sets the firm's bond and equity allocation
🎙️ Host: Doug Krizner, who anchors the Daybreak Asia podcast for Bloomberg Radio
📰 Published: 1 September 2026 on the Bloomberg Daybreak: Asia Edition feed
🔴 YouTube | 🟣 Apple Podcasts | ⏱️ 10 min
Key Takeaways
A rate increase is not a safe bet, but the probability is growing Higher oil is what pushes the Fed toward tightening, not away from it
The Bank of Japan will have to sell US Treasuries to support the yen Coons expects no move at the September meeting, and the delay is what forces the sale
The plan to hold down long-term yields by buying them has already faded Ten years ago the Fed could move markets by speaking; now the market shrugs off announcements
Food is the next inflation leg, because fertilizer is made from oil Crop prices had their biggest monthly jump in more than a decade in August
Producers have run out of room to absorb higher costs, so the consumer pays next
The strategy is defense: shorter-dated bonds, higher quality, income rather than growth He is not moving to cash, only taking money off the table after a long run in equities
1. Oil Reopens the Hike Case
Krizner opened with the weekend's strikes between the United States and Iran, the first exchange in about a month, and the price of crude that followed. West Texas Intermediate gained 2.8% in New York trading and was rising further in the electronic session after it.
The bond market moved with the oil price, in both time zones. "And with higher oil, we had long-term Treasury yields spiking a bit as well, with a 10-year adding about three basis points in New York, picking up another two basis points now in the Tokyo session to around 4.77%." — Doug Krizner
Krizner's opening question was whether expensive oil is the market's way of signaling that Federal Reserve rate increases are coming soon
Coons would not call a rate increase a safe bet, but he said the odds are rising. "You know, I don't know that it's a safe bet that we'll get rate increases. I think it's an absolute growing probability. But I think that this Fed is going to try to wait as long as they can before they have to take that measure." He said the renewed conflict in the Middle East adds to the argument for leaving rates where they are for now
His summary of the position was that there is no comfortable option. "So the Fed has quite a difficult road ahead of them."
2. Warsh Lays the Groundwork
The host put the day's Federal Reserve news to him: Chair Kevin Warsh had told a meeting of G20 finance ministers that US economic growth appears to have strengthened, and at Jackson Hole the previous Friday had said broad financial conditions were not restrictive.
Krizner read those two remarks as preparation for a rate increase. "He seems to be laying the groundwork for a rate hike, at the very least."
Coons agreed with the reading. He said the thing to avoid is stagflation — an economy with weak growth and high inflation at the same time
The resilience of the US economy is what makes a hike arguable. He said growth has held up far longer than nearly every economist called for, and it has done so with interest rates relatively high for the last five years
Preparing to act is not the same as acting, and he expects the gap to persist. "But I'll still stand by the fact that laying the pipes for that potential is much different than actually having to act on it."
3. Why the Yield Fix Faded
Krizner turned to Treasury Secretary Bessent, who had spent the previous week arguing, at least rhetorically, for bringing long-term interest rates down — including by using short-term government borrowing to buy longer-dated Treasury bonds. The host's own framing was that anyone in the administration would be uneasy at the current level: "We've got a 10-year at 475."
Coons expects long-term rates to rise before they fall. "I think we'll see higher rates before we see lower rates."
The change he pointed to is that announcements no longer move the bond market. He said that ten years ago the Federal Reserve could shift prices by speaking, without having to act at all "And now we've seen a dramatic shift where markets are really not believing and shrugging off these different measures."
The reason is that investors have seen the same intervention before and treat it as temporary. He put the Treasury's buying plan and the intervention in the yen a few weeks earlier in the same category — short-term fixes that fade without a broader policy change behind them, and he said this one already has
4. The Bank of Japan Sells
The yen strengthened against the dollar in New York trading after Bessent said he expects the Bank of Japan to take steps that will produce a stronger currency. Krizner added a report he was reading on the Bloomberg Terminal from the Japanese broadcaster NHK: Bessent had spoken at the G20 with Japan's finance minister, Katayama, and the central bank's governor, Ueda, and told them the next step should be to raise interest rates. His question was whether that could happen as soon as the September meeting.
Coons said probably not, and put it down to the institution's speed rather than its intent. He said the central bank went a couple of decades without taking certain actions and is likely to wait this one out
A Japanese central bank that does not move puts upward pressure on US interest rates, because the alternative route to supporting the currency runs through the Treasury market
That is the call: forced selling of US government debt to defend the yen. "The reality is that the BOJ is probably going to have to sell U.S. Treasuries, convert those U.S. dollars into yen in order to support their currency." He called it a growing likelihood, and tied it to the same argument as before — that the short-term measures are not going to fix the problem
5. Food Is the Next Leg
The host widened the inflation question past energy, and did it with a number.
Crop prices, not crude, produced the month's outlier move. "Crop prices, though, had their biggest monthly jump in more than a decade in the month of August. The Bloomberg Agriculture Spot Index was up more than 13%." — Doug Krizner He traced it to two supply shocks: the disruption to grain shipments when the war in Ukraine broke out, and the war with Iran interrupting the flow of fertilizer
Coons said the mechanism is that oil is an input to food, not just a competing price. Fertilizer is made from oil and the goods have to be transported, so an energy shock arrives in agriculture with a lag
The part that has changed is who absorbs the cost. He said producers had been able to take the earlier inflation on their own margins and wait it out, and that they can no longer do it The consumer is what he expects to feel it next, and he called that the pressure point on the global economy and on what central banks do about it
He does not think this is the whole event. "This is just that first ember in the fire before it possibly could erupt."
He noted that he and the host had discussed the same argument on the program a few months earlier
6. Defense Into 2027
Asked to tie it together into a strategy for the rest of the year, Coons gave a portfolio answer rather than a forecast.
"Well, I'd have to say that defense is the best offense right now."
It is not a call to restructure a portfolio, and specifically not a call to hold cash. What he described is taking money off the table after what he called a tremendous run in equity markets over the last several years
The three moves he named are all the same move — shorten, and go up in quality: More defensive stocks in the equity allocation Shorter-dated bonds, so that a further rise in interest rates does less damage Higher credit quality across the whole allocation, in corporate bonds as well as in equities, and income taken from dividends or from short-dated bonds
His reason is the number of things that could go wrong rather than any single one. "There's just a growing number of quote unquote, potential black swans out there." He said it is hard to say which one tips the market over, and that it could be several at once
The horizon on the defensive stance is this year, not forever. "So I think we just kind of got to weather the storm probably through the rest of this year and then look at what 2027 will bring us." The underlying US economy, he said, does still look strong
Bonus Insights
Bloomberg's own notes for the episode put the move in wider terms than the conversation did. The show's description records the 10-year Treasury yield rising three basis points to 4.78% in Asian trading, the highest since January 2025, with Japan's 10-year government bond yield at 2.985%
This interview is the first half of the episode. The second half is a separate conversation, recorded at Goldman Sachs's Asia Leaders Conference in Hong Kong with the firm's vice chairman Rob Kaplan, and it is written up on its own
Coons's bottom line is that the next move in US interest rates is more likely up than down, that a Bank of Japan forced to defend the yen would sell US Treasuries into that move, and that the place to wait is shorter-dated, higher-quality bonds and defensive stocks rather than cash.
Products, Companies & Tools Mentioned
Winthrop Capital Management (Coons's firm, where he is chief investment officer and sets the bond and equity allocation he describes here)
Bloomberg Agriculture Spot Index (The host's evidence that food is the next inflation problem — up more than 13% in August, its biggest monthly jump in more than a decade)
NHK (The Japanese broadcaster whose report, read off the Bloomberg Terminal on air, said Bessent urged higher rates in G20 conversations with Japan's finance minister and the central bank's governor)
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