Bitcoin Stabilizes After Hitting 4-Week Low — Market Talk
0634 GMT - Bitcoin stabilizes after reaching a four-week low on Thursday driven by U.S. data boosting expectations for further interest-rate rises by the Federal Reserve. Better-than-expected U.S. retail sales data along with higher-than-expected wholesale inflation data on Thursday further fuelled rate-rise bets after Wednesday's higher-than-expected consumer price inflation figures. A selloff in technology shares due to concerns about the AI trade had also hit risk-sensitive cryptocurrencies, although U.S. and Asian stocks recovered overnight, providing some relief. Bitcoin trades flat at $81,985 after reaching as low as $79,770 on Thursday, LSEG data show. ([email protected])0628 GMT - The dollar falls along with Treasury yields as concerns about the sustainability of debt-funded AI investments weigh. "Over the next three years, the U.S. is expected to spend 2.5%-3% of GDP on capital expenditure and AI infrastructure, which is larger than any infrastructure build out in the U.S. history," Jefferies economist Mohit Kumar says in a note. If the pace of AI build out slows, it would have important consequences for AI companies and the economy, he says. The dollar is also hit by recent comments from Federal Reserve officials, including John Williams and Michelle Bowman, sounding cautious over further interest-rate rises. The DXY dollar index falls 0.1% to 101.944 after hitting a 10-day low of 101.816 overnight. ([email protected])0558 GMT - China's piecemeal stimulus measures remain insufficient relative to the pace of domestic demand weakening, say BofA Global Research economists in a note. However, some recent policies could weigh on growth, at least in the near term, they say. New property policies curbing the presale model, under which developers could sell homes before units are ready for delivery, may hurt new housing starts and investment next year, which would also weigh on local governments' revenue from land sales and overall growth. A credible policy pivot combining stronger fiscal support, more decisive monetary easing and measures to boost consumption and investment, is needed to reverse expectations and support a durable recovery in domestic demand, BofA says. ([email protected]; @ivy_jiahuihuang)0553 GMT - The U.S. 10-year Treasury yield shows a rising risk of a deeper pullback on the weekly chart, says Quek Ser Leang of UOB Global Economics & Markets Research in a note. Last week's pullback has continued and is gathering momentum this week, the senior technical strategist notes. Although this week has yet to conclude, the 10-year yield is on course for its largest weekly drop since late July. Also, the weekly relative strength index is unwinding swiftly from overbought levels. A break below 5.021% could lead to a fall toward the 21-week exponential moving average, which is now near 4.81%, the strategist adds. The U.S. 10-year Treasury yield is little changed at 5.0863%, FactSet data show. ([email protected])0543 GMT - U.S. Treasury yields may have reached levels where their elevated levels weigh on risk sentiment, SEB's Jussi Hiljanen says. The sharp rise in short-dated Treasury yields coupled with a decline in long-dated ones after Wednesday's September consumer-price inflation print suggest that risk sentiment is fragile, the chief rates strategist says. This, in turn, helps cap the upside in Treasury yields, the chief rates strategist says. "The coming days will be important in determining whether the move triggers a continued short-covering rally," he says. ([email protected])0530 GMT - Inflation remains the pivotal variable because it will influence both the direction of monetary policy and the path of government bond yields, Payden & Rygel's Laura Lake and Tim Crawmer say in a note. "If inflation cools more decisively, bonds could deliver price appreciation in addition to income," the senior strategists say. With inflation proving persistent and the possibility of further Fed rate increases, near-term returns may depend more heavily on carry, they add. Payden & Rygel, which prefers a "measured duration position rather than a heroic one," reckons that shorter-duration spread assets can generate incremental income and may help offset some weakness in government bonds if rates remain volatile. ([email protected])0528 GMT - Payden & Rygel's exposure within U.S. fixed income has increasingly shifted toward the front end of the yield curve, senior strategists Laura Lake and Tim Crawmer say in a note. "Attractive starting yields, substantial tightening already reflected in prices, and greater sensitivity to any eventual change in Federal Reserve policy create a compelling combination," they say. More broadly, Payden & Rygel remains constructive on fixed income and credit spread risk, they say. ([email protected])0521 GMT - Investors are being paid to own bonds again, Payden & Rygel's Laura Lake and Tim Crawmer say in a note. "All-in yields are attractive, corporate fundamentals remain broadly sound and demand for fixed income is robust," the senior strategists say. That gives investors a meaningful source of income while they wait for greater clarity on inflation and interest rates, they say. There is also the potential for more than income. If inflation moderates and government bond yields move lower, investors could benefit from capital appreciation as well, they add. "We do not expect the path to be smooth, but the starting yield provides a much better cushion than investors had during the long low-rate era." ([email protected])0513 GMT - Candriam remains underweight in French and Belgium government bonds, Nicolas Jullien, global head of fixed income says. "French spreads have widened substantially, but the lack of a clear path to fiscal adjustment and the approaching presidential election leave few catalysts for sustained improvement," he says in a note. France's average financing cost remains around 2%, but new borrowing costs exceed 4%, and with close to 40% of outstanding debt requiring refinancing over five years, persistently high yields would progressively increase the budget burden, he says. A credible fiscal program could support a rally. Uncertainty around France's fiscal prospects currently supports Bunds, but that relationship could reverse if the European Central Bank takes forceful action to contain sovereign spreads, he says. ([email protected])0513 GMT - Candriam maintains its duration overweight in the eurozone's rates universe, centered on the 10-year German Bund, alongside a 10-30-year steepening bias, says Nicolas Jullien, global head of fixed income, in a note. Candriam's valuation framework points to a Bund yield around 3.25%, allowing for another European Central Bank rate hike this year, he says. Markets price roughly three further hikes by summer 2027 after September's raise, a demanding path for an economy whose underlying growth prospects remain modest, he adds. ([email protected])0350 GMT - The dollar will likely trade between 4.08 and 4.09 ringgit next week, Kenanga economists say in a note. Escalating U.S.-Iran tensions could keep oil prices and U.S. inflation expectations elevated, while September Malaysian inflation and trade data will be in focus, they say. They expect the Fed to raise rates by 25 bps in December and no moves in 2027, although markets are pricing in two further hikes. Stretched investor positioning could limit the dollar's gains, leaving the ringgit volatile but rangebound, they add. Kenanga expects the dollar to face resistance at 4.085 ringgit, with support at 4.081 ringgit. The dollar is flat at 4.0846 ringgit. ([email protected])0329 GMT - Evidence is mounting that 100 basis points of official-interest-rate increases this year by the Reserve Bank of Australia might be enough. Capital Economics economist Marcel Thieliant says the central bank's September rate increase has made policy more restrictive than even the central bank had thought. The tightening has taken its toll on activity and the job market, with the unemployment rate continuing to rise, he says. That should be enough to signal policy has been tightened sufficiently, though inflation will have to come off the boil before the hike cycle truly ends, he adds. ([email protected]; @JamesGlynnWSJ)