Eurozone Government Bond Yields Decline — Market Talk
0708 GMT - Eurozone government bond yields fall in opening trade as oil prices are marginally lower. There is no impulse from U.S. Treasurys as the Treasury market is closed due to Columbus Day. There is no eurozone government-bond issuance on Monday but Ireland and Slovakia will release details of their upcoming auctions, while Spain will announce the target volume for its auction. The 10-year German Bund yield falls 2.7 basis points to 3.462%, while the 10-year French 10-year OAT yield declines 2.7 basis points to 4.836%, according to Tradeweb. ([email protected])0649 GMT - Bitcoin rises after President Trump announced an energy ceasefire between Ukraine and Russia. Ukraine President Volodymyr Zelensky said the deal was "news to me" but would agree if Russian President Vladimir Putin did the same. "Markets open Monday with a tentative improvement in risk appetite as softer oil prices offer some relief from inflation concerns, despite renewed attacks on Saudi Arabia," LMAX Group's Joel Kruger says in a note. The Russia-Ukraine news has encouraged hopes of easing pressure on fuel markets, he says. However, the ceasefire remains disputed, while Iran-backed Houthi attacks on Saudi infrastructure highlight the continuing threat to regional supplies, he says. Bitcoin rises 0.3% to $83,893, LSEG data show. ([email protected])0646 GMT - The dollar trades steady as investors weigh President Trump's announcement of a Russia-Ukraine energy ceasefire against attacks in Saudi Arabia. Oil prices ease after Trump said Russia and Ukraine reached an agreement. Ukraine President Volodymyr Zelensky said the deal was "news to me" but would agree if Russian President Vladimir Putin did the same. Iran-backed Houthis said they were behind multiple attacks against the international airport in Saudi Arabia's capital Riyadh at the weekend. The U.S. Treasury market is closed Monday for Columbus Day. Investors await U.S. inflation data on Wednesday for clues on future interest-rate decisions. The DXY dollar index is flat at 102.199. ([email protected])0600 GMT - For long-term investors, a 5% yield on five-year U.S. Treasurys is a very attractive level to buy, says Mohit Kumar at Jefferies. "Problem is most investors are thinking till end November or December, which is their year-end, rather than from a long term basis," the global economist says in a note. While elevated oil prices and deficit concerns remain the main reasons for the high bond yields, the time of the year has also led to buyers to be unwilling to buy and support the market, he says. On Friday, five-year Treasury yield closed at 5.020%, according to Tradeweb. ([email protected])0555 GMT - The current bond market selloff is a reminder of how challenging a world flooded with public debt will be, says Edoardo Campanella, director and chief editor of The Investment Institute by UniCredit. For investors, the key lesson is that Europe's race to boost its strategic autonomy is unlikely to be financed through a simple transfer of resources from welfare to defense, he says. The adjustment will occur through higher public borrowing, higher taxation, and a larger state, and this points to a structurally higher equilibrium level of interest rates, even if cyclical growth remains modest. "Without a more cohesive relationship between fiscal and monetary authorities, the risk is underinvestment in the strategic areas of relevance for the future of Europe and widening sovereign spreads among European nations." ([email protected])0547 GMT - The rupee could strengthen to the mid-95 level against the dollar near term following the RBI's latest currency support measures, says Vishnu Varathan of Mizuho Securities. The 20% cash reserve requirement for rupee-linked forex derivative contracts above $2 million makes it "prohibitively expensive to mount a speculative attack on the rupee," he writes. Meanwhile, introducing a special window to meet dollar needs of India's three largest oil companies eases rupee pressure by "ring-fencing" oil-driven dollar demand from the wider forex market, the APAC macro strategy head adds. Still, the moves may have a "short half-life" as dollar strength and external shocks persist, he says. Rupee pressures could resurface in late 2026 or early 2027, bringing the 98 level into view, he adds. The dollar falls 1% to 95.75 rupees. ([email protected])0539 GMT - U.S. Treasury yields are expected to fall further, although the inflation picture and the Federal Reserve may be stiff near-term headwinds, Capital Economics Thomas Mathews says in a note. U.S. Treasurys recovered slightly last week and one potential cause for the rally was a couple of strong Treasury auctions, the head of markets for Asia Pacific says. "But while that's welcome news, auction strength has not always been a reliable signal of sustained gains in the past. If anything, higher bid-to-cover ratios have often coincided with rising yields," he says. Nonetheless, Capital Economics retains the view that the Treasury rally will eventually make its way onto firmer footing. ([email protected])0531 GMT - Morgan Stanley strategists see value in U.S. Treasury duration but would wait until after the Federal Reserve's Oct. 28 interest-rate decision and the Nov. 3 midterm elections before adding to it, they say in a note. Ten-year yields still track the market-implied Fed path, and the recent rise in non-Fed risk premium doesn't yet justify a longer-duration stance, they say. "Midterm policy outcomes should matter little for Treasurys, but the vote's passing may change Iran's approach to the Strait of Hormuz and the energy trend." ([email protected])0526 GMT - Citi confirms its neutral view on U.S. Treasurys despite last week's strong 10-year auction, finding little evidence that two consecutive strong 10-year auctions mark an end of the current mini-buyers' strike, strategist Jason Williams says in a note. "We remain neutral on the curve, mostly due to our expectation that Treasury Secretary Bessent is likely to reduce the auction sizes for 20s and 30s at the November 4th refunding," he says. Citi's base case is a $3 billion reduction per auction, which would be funded by additional T-bill issuance, he says. Ahead of the coming CPI report, Citi remains positioned for unchanged Fed interest rates at the October meeting. Citi also continues to expect the 10- to 20-year Treasury curve to steepen. ([email protected])0517 GMT - Higher yields create a better starting point for bonds, but yields are higher for legitimate reasons, with potentially further to go, Madison Investments' Mike Sanders says in a note. "Energy prices, tariffs, and fiscal deficits are all pressuring the long end of the yield curve, while persistent above-target inflation has left the Federal Reserve little choice but to intervene with rate hikes," the head of fixed income says. The good news is that higher starting yields are doing exactly what markets would expect them to do. Despite the move higher in rates, bond returns have held up much better than they did during the 2022 selloff, as income is providing a meaningful cushion against interest rate volatility, he says. ([email protected])0514 GMT - Investors pay close attention to the 10-year U.S. Treasury yield because it is a foundational "risk free" reference point by which just about every asset in the world is valued, Madison Investments' Mike Sanders says in a note. Traditionally, the 10-year yield is a reflection of economic growth expectations and inflation, but more recently other factors have become more influential, the head of fixed income says. These include the path of Federal Reserve policy, energy prices, fiscal deficit and foreign demand, he says. "As the Fed steers the short-term policy rate to head off inflation or stimulate growth, the market-driven 10-year yield will often be an indication of the Fed's level of success." ([email protected])0443 GMT - Singapore's central bank is likely to tighten policy very slightly on Wednesday, Maybank analysts say in a research report. "Our economists see 2026 growth for Singapore at 5.2%, with risks to the upside," the analysts say. "Our economists also recently revised forecasts to 2% and 2.1% in 2026" for core inflation and headline inflation, respectively, the analysts say. This implies an increase in core inflation to around 2.5% for rest of 2026, the top end of the MAS's inflation forecast range. The MAS is likely to tighten policy via a "very slight" increase in the slope of the Singapore dollar nominal effective exchange rate's policy band, the analysts add. ([email protected])