Bitcoin Edges Higher as Treasury Yields, Dollar Ease — Market Talk
0711 GMT - Bitcoin rises slightly as Treasury yields and the dollar ease along with oil prices. "Energy prices have dipped a little, down from a fresh spike on Monday, but remain scorchingly high," Wealth Club's Susannah Streeter says in a note. Brent crude is still above $105 a barrel as the Middle East conflict looks increasingly difficult to resolve, she says. U.S. inflation data Wednesday will be a key test of how much the surge in energy prices is feeding through into the cost of living and how much pressure the Federal Reserve might feel to raise interest rates further, she says. Bitcoin edges up 0.8% to $83,673, LSEG data show. ([email protected])0638 GMT - The dollar is likely to trade in the 157.50 yen to 159.30 yen range this week, says Sony Financial Group analyst Kumiko Ishikawa. Despite recent cues from the U.S. and Japanese central banks, the dollar-yen pair remains directionless, partly because markets have already priced in December rate hikes in both countries, she says. "With plenty of time remaining until December, markets are unlikely to rush to adjust their rate expectations in response to minor fluctuations in economic indicators. As a result, neither the dollar nor the yen is showing a distinct direction," she adds. The dollar last trades at 158.26 yen. ([email protected])0634 GMT - The dollar remains elevated after reaching an 18-month high on Monday, lifted by softer risk sentiment and comments from Federal Reserve official Beth Hammack arguing for further interest-rate rises, Danske Bank's Silje Bue says in a note. Markets are now waiting for U.S. inflation data on Wednesday for more clues on future rate decisions. "Markets are currently pricing in only 5-6 basis points for October, so even if the CPI confirms that the Fed will likely opt for only a quarterly hiking pace, we doubt it would mark a significant setback to the dollar," Bue says. The DXY dollar index falls 0.2% to 102.431 as Treasury yields and oil prices fall, but remains near the high of 102.607 reached Monday.([email protected])0631 GMT - Eurozone government bond yields open lower, tracking U.S. Treasury yields and helped by declining oil prices. Global bond yields are distancing themselves from recent multiyear or multidecade highs as investors consider their elevated levels increasingly attractive for long-term purchases. Government bond supply in the eurozone will come from the Netherlands, Italy and Germany. The 10-year German Bund yield falls 3.6 basis points to 3.438%, according to Tradeweb. ([email protected])0626 GMT - Much of the bad news for gold has already been priced in, says UBS's Sharon Ding in commentary. Gold has fallen around 5% since early September as persistent inflation concerns revived expectations of further Federal Reserve rate hikes, the head of China basic materials research says. However, she reckons significant hawkish repricing is now reflected in gold prices. This headwind could be starting to moderate as expectations of an October Fed rate hike ease, she says. "We see greater scope for stabilization if incoming data no longer justify further upward revisions to the expected policy path," she adds. A sustained retreat in Treasury yields could also strengthen the case for gold's recovery, she says. Spot gold rises 0.4% to $4,188.48 a troy ounce. ([email protected])0608 GMT - Jefferies has been underweight French bonds and remains in the bearish camp but doesn't consider the situation comparable with the eurozone's debt crisis in the early 2010s, says global economist Mohit Kumar. "To be clear, we do not think that we are in a sovereign crisis, or we should draw parallels with 2012," he says. "Our main worry is that with no clear plan to bring down deficits, we do not see any buyers stepping in to support France." In Europe, the current inflation problem of rising energy and food prices would likely translate into further fiscal concerns as politicians will try to provide help to households, he says. ([email protected])0601 GMT - Japanese corporate goods prices are expected to continue rising at around 6%, says NLI Research Institute's Masayuki Sato. In addition to ongoing Middle East concerns, surging semiconductor memory prices--backed by solid AI-related demand--alongside rising costs for petroleum, coal, and chemicals spilling over into plastic goods, are pushing up wholesale prices, he says. "For food and beverage products, price growth could accelerate going forward as companies show a stronger stance toward passing on costs, while raw material expenses rise due to higher import prices," he says. Corporate goods prices rose 6.8% in September from a year earlier, according to Bank of Japan data released Tuesday. ([email protected])0528 GMT - AI investment spending is likely contributing to higher U.S. Treasury yields via its impact on both cyclical and longer-term growth optimism, Goldman Sachs analysts say in a note. Still, the analysts find little evidence that absorbing related debt supply has an outsized or durable impact on yields. Higher macro uncertainty also plays a role, they add. U.S. Treasurys have a weakened role as a portfolio diversifier, too. Both factors are consistent with a higher risk premium. ([email protected])0526 GMT - Morgan Stanley has removed its cautious call on European credit, as two-year-wide spreads, improving growth and solid fundamentals make the risk-reward more compelling, they say. "We think IG [investment grade] can absorb higher rates thanks to low leverage and long-dated fixed-coupon debt," its analysts say. Lower-rated high-yield is more exposed, however, according to the analysts who expect further decompression across HY ratings, with single-Bs most vulnerable. "We continue to view the real estate sector as most vulnerable to further rates weakness, and we don't believe the sector's valuations fully reflect this risk." ([email protected])0520 GMT - The potential for the 10-year U.S. Treasury yield to rise further appears limited, according to DZ Bank analysts. They estimate that the term premium--the additional yield investors demand for buying a longer-dated bond versus a shorter-dated one--on 10-year U.S. Treasury yields is 91 basis points. That is in line with the average level since the early 1990s but also the highest level since 2014. This, together with the anticipated scaling back of markets' hawkish interest-rate expectations, keeps the scope for further rises in yields manageable, they say. The 10-year Treasury yield is down 5 basis points to 5.193% in Asian trade, according to Tradeweb. ([email protected])0512 GMT - An anticipated acceleration in U.S. September consumer inflation, due on Wednesday, is unlikely to prompt the Fed to raise interest rates in October, says Macquarie Group's Thierry Wizman in a note. "We do not believe that the report will sway the Fed into hiking later this month," the global FX and rates strategist says. Many Fed officials have already expressed a predilection for hiking at every other meeting, rather than consecutively, he says. Analysts in The Wall Street Journal's poll forecast the headline year-over-year CPI to rise to 3.6% from 3.4% in August. Money markets currently price in a 19% probability of a Fed rate hike on Oct. 28, according to LSEG. ([email protected])0447 GMT - The Reserve Bank of Australia's November policy meeting is "very much live," according to Belinda Allen, economist at CBA. CBA still feels as though the RBA will not raise interest rates, but the risk of it being wrong is high, she adds. Recent comments by the RBA have been "decisively hawkish" with a clear focus on upside risks to inflation and little attention given to downside risks to growth, she adds. ([email protected]; @JamesGlynnWSJ)