'Going Really Big' on Bond Buyback Would Have Been a Mistake — Market Talk
1554 ET - The 10-year yield approached 4.85%, its highest level since 2023, after the Treasury announced it was buying back up to $6 billion in longer-term debt. "Some investors had bet on a much bigger shock-and-awe announcement of $10bn or even more," says Evercore ISI's Krishna Guha in a note. He says he takes some reassurance from Secretary Bessent's decision, because "going really big would have been a mistake." Guha believes the move suggests Bessent accepts a limited role for buybacks in creating some uncertainty for shorts while potentially opposing overshooting but recognizes "that the US cannot durably prevent fundamentals from dictating yields and the scale of buybacks required to try would create more problems than it he solves." He adds that staying in more limited territory avoids more turbulence for Fed chair Warsh at next week's FOMC. ([email protected])1401 ET - The direct cost to Canada from President Trump's latest tariff adjustment and import ban is a proverbial drop in the bucket, says economist Tu Nguyen of RSM Canada. "The indirect economic impact is more serious," she warns. Until recently, Canada's economy has struggled under the weight of trade-policy uncertainty stemming from Trump's expanded use of tariffs. Talks toward a US-Canada trade pact collapsed, igniting a tit-for-tat tariff conflict. "Uncertainty remains the elephant in the room," Nguyen says. Firms can account for tariffs, "but they cannot plan for rules that seem to change on a near-constant basis." She adds that Canada PM Mark Carney's recent remarks have a somber tone, suggesting turbulence ahead for households and firms. ([email protected]; @paulvieira)1343 ET - A memecoin launched by Hunter Biden, called Hunter Biden's Laptop ($LAPTOP) initially jumped 200% in the first few minutes of its debut. It has since shed 98% of its value, and currently trades at $1.81 with a fully-diluted market cap around $1.76B, according to data from Coinbase via its Base app, which is where the coin was launched, according to WSJ. The coin debuted at 8 a.m, and was down 95% by 9 a.m., according to data from Base. ([email protected])1240 ET - Fitch Ratings raises its outlook on the state of Illinois to positive from stable, and affirms the state's Issuer Default Rating at A-. Fitch also assigns an A- rating to $900 million of Illinois general obligation bonds slated to be sold on Sept. 22. Fitch said the new outlook reflects the state's trend of normalized operating performance, which include slowly declining long-term liabilities and carrying costs and contributions to dedicated reserves. Last month, Moody's Ratings upgraded Illinois to A1 from A2, which the agency said reflected continued improvement in the state's financial metrics. ([email protected])1204 ET - Bitcoin briefly dipped but rebounded, after the Treasury said it would buy up to $6 billion of longer-term debt at its Thursday buyback operation. The announcement sent bond yields higher with the 2-year yield now at 4.85%. Markets initially responded by moving money out of riskier assets such as cryptocurrencies like bitcoin which had been in positive territory before the announcement. Bitcoin is rising again, up 0.2%. ([email protected])1136 ET - Second-round effects from high energy prices in the U.K. are unlikely to emerge, largely because labor-market conditions are much looser than they were in 2022's inflationary episode, Oxford Economics' Andrew Goodwin says in a note. The Bank of England will therefore hold its key interest rate at 3.75% until well into next year, he says. Then, once policymakers are content that the inflation shock has proven transitory, it should cut rates again, according to Goodwin. A majority of rate setters feel that cooling domestic inflationary pressures before the Iran war, the fact that the policy rate is already restrictive, and the tightening in financial conditions that's already occurred, give them breathing space to sit back and see how things play out, he says. ([email protected])1132 ET - The U.K. government could raise taxes or reduce public spending or consider both measures at the October 28, budget due to rising borrowing costs, AJ Bell's Dan Coatsworth says in a note. Gilt yields hit multi-decade highs last week and remain close to those levels due to inflation concerns driven by accelerating oil prices. Ten-year gilt yields climb 5.8 basis points to last trade at 5.219%, after hitting a 19-year high of 5.294% last week, LSEG data show. ([email protected])1105 ET - While the Bank of England is set to keep interest rates unchanged next week, its tone will likely become more cautious after recent re-escalation of tensions in the Middle East, UBS economists say in a note. The increase in energy prices is likely to be a concern for policymakers as they had previously argued that a more persistent energy shock would imply a greater risk of second-round effects occurring, they say. Rising expectations of hikes by the Federal Reserve, Bank of Japan, alongside the already-tightening European Central Bank, may put pressure on rate setters to be more proactive. Even if second-round effects are so far absent, reputation and risk-management considerations could tilt the BOE towards pre-emptive hikes, the economists say. ([email protected])1049 ET - Bitcoin stays in its recent range between $77,000 to $81,000, with it trading up 0.7% to $79,068. The volume and activity that powered bitcoin in recent weeks appears to have shifted towards altcoins, says analysts with Bitfinex in a note. "Every one of the 29 largest liquid pairs rose between 1-8 September, with a median gain of 10.2% against 1.4% for bitcoin," says the firm. Polkadot is the leading gainer among major cryptocurrencies in that timeframe, having gained 35% in the past week, according to data from CoinGlass. "This reflects a return of risk appetite in the market," says Bitfinex. Ethereum rises 0.6% to $2,498, XRP climbs 0.7% to $1.42, and solana is up 0.4% to $103.47. ([email protected])1046 ET - Any future curbs on short-term rentals in the EU should be rooted in evidence, travel industry lobby group eu travel tech says. The comments come on the heels of a European Commission proposal to give local authorities more legal clarity when they seek to crack down on tourist rentals if they are harming the local housing market. The group--which counts Airbnb, Booking.com and Expedia Group as members--says that short-term rentals represent around 1.2% of dwelling stock while nearly 20% of EU dwellings are unoccupied. "If the EU wants to solve the housing crisis, it must address its real drivers--not target short-term rentals," it says. ([email protected])1022 ET - New listings of homes for sale rose 2.6% month over month to their highest level in over four years in August, according to Redfin. The surge in fresh supply was driven by San Jose, where listings rose 25.5% year over year, Nashville at 15.8% and Seattle, 13.7%. More homeowners are listing as the mortgage-rate lock-in effect fades, life circumstances prompt moves and sellers adjust to a slower market. The jump in listings is contributing to a widening pool of overall supply. The total number of homes for sale rose 3.9% from a month earlier to its highest level since 2020. Pending home sales were flat from a month earlier. Closed home sales, a more lagging indicator of demand, fell 0.5% to their lowest level in over a year. ([email protected])0954 ET - Canada's retaliatory tariffs on C$28 billion in U.S. goods is a shift that should translate to a real consumer drag. According to an ATB Financial report, the response to President Trump's latest tariffs will raise the cost of imports, now that an estimated 7%-8% from the U.S. are subject to counter-tariffs. "Some of the impacts on consumer prices are direct," says the report, pointing to consumer purchases of household goods, recreation and food, while others are indirect, meaning the tariffs fall on industrial and capital purchases that raise the cost of production which will partially be passed onto customers. The report says that this should raise inflation by 0.2%-0.3% on a rate that is "already running too high at about 3%." ([email protected])