New Zealand Yields Biased Higher As Caution Continues — Market Talk
1733 ET - The yield on the U.S. 10-year bond has moved to a fresh post-2007 high of 5.301%. The market price action suggests investors are trading with more of a "sell rallies" than "buy dips" mindset, says ANZ in a note to clients. Caution remains warranted as the bond rout continues and New Zealand rates will be biased higher in the coming session, it adds. Spreads to U.S. bonds are moving further into negative territory, consistent with the better relative fiscal outlook in New Zealand, it adds. That is resulting in local yields rising more slowly rather than bucking the global trend and falling, ANZ says. ([email protected]; @JamesGlynnWSJ)1559 ET - Treasury yields reverse a flimsy decline caused by relatively mild inflation data to end a volatile quarter. Yields rose by nearly a full percentage point in the longer end, as markets furiously repriced expectations of a Fed hike amid rising government spending. The 10-year benchmark adds 0.872 percentage point in the past three months, most of it in September, to 5.292%, its highest settlement since May 2002. The 30-year also sets new 24-year highs and ends the quarter at 5.638%. The two-year rises 0.747 points in the 3Q, its highest quarterly increase since 2023, to 4.885%. Weekly jobless claims are expected to increase to 200,000 from 197,000. ([email protected]; @ptrevisani)1240 ET - Higher mortgage rates are reshaping the fall housing market, Realtor.com says, pushing more sellers to reduce prices while fewer buyers move forward with a purchase. The share of active listings with a price reduction rose to 20.8% in September, up 0.9 percentage points from a year earlier. Active inventory grew 5.4% year over year to almost 1.2M homes. The stock of homes under contract declined 4.1%. September's data shows that buyers are gaining leverage, but higher mortgage rates are limiting how much of that opportunity they can use, Realtor.com says. The national median list price was $419,250 in September, down 1.2% from August and 1.4% from a year ago. Homes spent a median of 61 days on the market--one day longer than in August but one day fewer than a year earlier, Realtor.com says. ([email protected])1154 ET - Bitcoin is set to close out the third quarter with a small gain — rising 0.8% to $84,226. It has gained over 40% this quarter, making it the strongest quarter for bitcoin since 4Q 2024. But the fuel for this big jump may be limited, at least for now, says analysts for Bitfinex in a note. "With leverage substantially reduced, the next sustained move will need to be led by the spot market," says the firm. Buyers appear willing to buy bitcoin in its current area of around $85,000, but the underlying that appetite for bitcoin among retail investors is buying by fund investors - with inflows recorded for bitcoin ETFs for nine consecutive days, according to data from Coinglass. ([email protected])1115 ET - The Bureau of Economic Analysis's annual benchmark revisions lowered the Fed's preferred inflation measure more than anticipated, even if inflation is still well above the Fed's 2% target, BMO analysts say in a research note. August's core-PCE gain was softer than expected and slowed to 3% year-over-year, below the 3.3% consensus and the Fed's own estimates of 3.2%, the analysts say. At the same time, the economy is still expanding and private hiring remains steady, they say. That, plus the downward revision in inflation, removes some of the immediate urgency for another rate hike in October, the analysts say. ([email protected])1109 ET - Soaring government bond yields, which translate to high borrowing costs, could weigh on corporates in the foreseeable future, Societe Generale's Juan Valencia says in a note. For now, debt servicing costs remain manageable because companies still hold bonds issued in the past at lower coupons, he says. The cost of debt is likely to rise further as bonds maturing are replaced by bonds with higher coupons, Valencia says. "The rising sovereign bond yields means that the cost of funding is getting more onerous for companies and banks," he says. ([email protected])1052 ET - Revised economic-growth data presents another solid first-half performance for the British economy, Investec's Sandra Horsfield says in a note. The U.K.'s data office revised up second-quarter GDP growth to 0.5%, from 0.4% previously reported. The revision is mainly due to firmer services growth, as professional, scientific and technical activities jumped by 2.3%. However, the post-pandemic pattern of strong growth in the first half of the year followed by a weaker performance in the second is set stay firmly in place, Horsefield says. Momentum could cool in the second half, not only on fiscal uncertainty similar to recent years, but also as the rise in wholesale energy prices increasingly filters through to bite households and firms, she says. ([email protected])1051 ET - The downward revision in inflation from the August PCE report was driven by how its measured rather than how it's trending, meaning consumers aren't actually feeling any additional price relief, Fifth Third Commercial Bank's Bill Adams says in a note. The gap between current inflation and the Fed's target is glaring, Adams says. The report doesn't capture the boost to spending power from capital gains, which are giving affluent Americans a big leg-up but doing little for people living paycheck-to-paycheck, he says. That helps explain why consumer confidence just fell to a 12-year low, Adams says. ([email protected])1041 ET - Germany's September inflation print extends the string of upside surprises in the advance national data releases ahead of Friday's eurozone data, increasing the chance of a European Central Bank interest-rate hike, Pantheon Macroeconomics' Claus Vistesen says. "Risks are now tilted towards eurozone headline inflation printing at 3.9% on Friday, which would put the cat among the pigeons for the ECB's October rate call," he says in a note. National data, which included higher-than-expected inflation in Italy and France, suggest that by the end of Friday the probability of an October hike will be higher than markets currently price in, he says. Investors currently expect about a 40% chance of a hike on Oct. 29, LSEG data show. ([email protected])1040 ET - Supply of U.S. investment-grade corporate bonds is expected to reduce in October due to the recent rise in bond yields and high volatility in sovereign bond markets, Bank of America credit strategists say in a note. In addition, there are likely to be fewer company mergers and acquisitions in October before picking up in November after earnings, hence slower corporate-debt supply, they say. Investment-grade credit issuance is expected to slow down to $110 billion in October, down from $162 billion issued a year earlier, the strategists say. ([email protected])1039 ET - Investors are absorbing mixed messages from the deluge of economic data provided this morning, Northlight Asset Management's Chris Zaccarelli says in a note. The economy is expanding at a good pace but inflation is running too hot, he says. The monthly numbers are too high and rising, but year-over-year figures are improving, Zaccarelli says. That mixture of data shows the Federal Reserve was probably right to raise rates this month, but could hold rates at the next meeting or at least ease their policy plans if the inflation data improves, he says. Zaccarelli expects that a strong earnings season and getting past the midterm elections will break the market out of its current trading range. ([email protected])1035 ET - Germany's inflation rate is likely to temporarily drop back below 3%, though underlying price pressures are set to gradually pick up, Commerzbank's Ralph Solveen says. Inflation rose to 3.3% in September from 2.9% in August, with the core rate at 2.4%, though a fuel tax rebate should keep a lid on energy-price rises that fueled September jump. However, the rebate is set to expire at the end of the year, and companies are expected to increasingly pass on their higher energy costs to their customers, raising the core rate, Solveen says in a note. Based on national figures available so far, the eurozone's inflation rate due Friday is expected to climb 3.8% in September from 3.2%, he says. ([email protected])