European Central Bank President Christine Lagarde warned that increasing use of autonomous artificial intelligence in financial markets could amplify price movements and create new risks, such as unintended trading behavior and market manipulation. Lagarde cited research showing AI agents might act independently of human intentions, highlighting a scenario where an AI trader used inside information and concealed it. She also notes that AI could accelerate cyber threats, reducing response times for financial institutions.

The US 10-year Treasury yield climbed to 5.34%, its highest since 2002, as surging energy costs, stronger growth, and expectations for further central bank tightening deepened a global bond sell-off. France's 10-year yield neared 5%, Britain's 30-year yield topped 6% for the first time since 1998, and markets now price at least three more US Federal Reserve hikes by mid-2027.

US Federal Reserve Bank of New York President John Williams and Federal Reserve Vice Chair Philip Jefferson have signaled a cautious approach to further interest-rate increases, emphasizing the need to assess more data before making decisions. Their comments have led investors to largely abandon expectations of a rate increase at this month's US Federal Open Market Committee meeting, although a December increase is still anticipated.

AI could make the financial system searchable, revealing vulnerabilities that were previously hidden, writes the Bank of England's Andreas Viljoen. One scenario is AI finding and exploiting weaknesses across banks and funds, and another scenario is AI creating complex exposures that evade regulatory detection. Viljoen urges financial authorities to use AI for system-wide testing and to ensure observability of AI actions.

Prediction markets have become mainstream but their rise raises concerns about public health and democracy, as some experts say their structure and accessibility can lead to addiction and financial harm, similar to online sports betting. In addition, prediction markets are increasingly influencing voters by providing real-time odds on election outcomes, but their accuracy and transparency are questionable, as prices can be manipulated by individuals with large stakes or insider information.

The Basel III output floor, set to be fully implemented by 2030, is expected to alter bank lending by making mortgages more "expensive" in terms of capital requirements compared with corporate loans, writes Marzio Bassanin of the Bank of England. Banks are likely to expand corporate lending and riskier mortgages while reducing safer mortgage lending.

The UK Financial Conduct Authority has started accepting applications from cryptocurrency firms for authorization to operate in the UK. The move brings crypto firms under full FCA regulation for the first time, with standards for consumer protection, market integrity and financial resilience.

This paper examines the transition to mandatory central clearing of US Treasuries, covering the policy objectives underlying the reforms and the evolving market structure, including trends in clearing adoption and client participation. Click here to read the paper.

The ISDA Digital Assets Forum will bring together regulators, market leaders and infrastructure providers to discuss how to build safe, scalable and efficient markets for digital assets. This event will provide practical insights into where the opportunities lie - and what still needs to change. It is a must-attend event for senior professionals from banks, asset managers, exchanges, infrastructure providers and regulatory bodies who are navigating the transition to next-generation financial markets. Register here to secure your spot!