Treasury Auction Outcomes Being Closely Watched — Market Talk
0802 ET - The Treasury auctions $58 billion in 3-year notes later today, with $39 billion in 10-year notes on the docket for Wednesday and $22 billion in 30-year bonds to be auctioned Thursday. Analysts said the looming auctions were one factor pushing yields up Monday, with some investors likely nervous about how the auctions would be received. But JPMorgan's fixed income strategy team believes today's auction should be met with better demand. "Three-year yields have risen by 48bp since the last auction and if they clear at this level, it would be the highest yielding 3-year auction since May 9th 2006. Given a more supportive macro and technical backdrop, we think [Tuesday's] auction will be digested smoothly," the strategists say. ([email protected])0738 ET - Bitcoin is showing resilience, along with other risky assets, to recent major headwinds, Block Scholes analyst Thahbib Rahman says in a note. The U.S. Senate's failure to advance the Clarity Act crypto regulation bill and the Federal Reserve's decision to raise interest rates in September have failed to meaningfully weaken bitcoin, he says. However, bitcoin has struggled to sustain levels above $87,000, making it a key resistance level, he says. Spot bitcoin exchange traded funds demand has also eased slightly. Still, investors are maintaining a positive bias and "as long as geopolitical tensions do not escalate and interest rate hike expectations remain subdued, markets could remain in risk-on mode." Bitcoin rises 0.6% to $86,270, LSEG data show. ([email protected])0731 ET - KPMG continues to expect one performative interest rate increase from the Bank of Canada, and now sees that coming in December. Markets are pricing in four increases by the end of 2027, which KPMG doesn't reckon is sensible. A single increase is about financial dominance and the need to demonstrate central bank credibility, rather than any worry about the current fundamentals, KPMG argues. The Bank of Canada is likely to send a strong signal at the October meeting, act in December, then hold tight for the foreseeable future, it says. ([email protected]; @RobbMStewart)0720 ET - Tokenization, or the ability to convert real-world assets into digital tokens, will become the new normal as private companies and politicians push to bring the technology into the mainstream, Union Investment's head of tokenization and digital assets Christoph Hock says. "Politicians are driving the shift into a redefinition of financial market infrastructure," Hock says at the Digital Assets week conference in London. Central bank interest in developing their own tokenization capabilities is encouraging, and adds to progress from private companies in bringing the technology into the mainstream. "The ingredients are all there" for tokenization adoption to significantly increase, Hock says. ([email protected])0709 ET - CGI's declining job postings could suggest pressure on near-term organic growth, according to a research note by RBC. Analyst Paul Treiber says that CGI's job postings declined 25% year-over-year, deteriorating of a decline of 8% last quarter, which has "underperformed the broader IT services market, where postings rose 14% year-on-year." The data suggest that CGI organic growth may fall short of his estimates, which was for a decline of 0.2%. Treiber adds that the job data also suggest a softer near-term demand environment, further pointing to CGI's bookings last quarter which were also below expectations. ([email protected])0702 ET - India's central bank is likely to raise its policy repo rate by 25 bps to 5.50% on Wednesday, according to nine out of 10 economists polled by The Wall Street Journal. Rising energy costs and a sharp pickup in food prices are expected to push CPI inflation back above the Reserve Bank of India's target range, and it'll likely raise rates to prevent inflation expectations from de-anchoring, ING economists write in a note. UOB economist Jester Koh noted from the MPC meetings in August that several members said that while rate hikes on the horizon, they are adopting a wait-and-see approach first. Koh expects the RBI to be on pause before delivering two back-to-back 25bps rate hikes. ([email protected])0701 ET - The upcoming minutes of the Federal Reserve's September meeting will provide the next major test for the dollar, Tapaas chief executive Jonathan Squires says in a note. With markets pricing little chance of policy tightening for the October 28 decision, evidence of broad support for further interest-rate hikes could trigger a repricing and boost the dollar, he says. "Conversely, signs of disagreement over the timing or need for additional tightening could weaken the broader multi-hike path and weigh on the currency." The Fed minutes will be released on Wednesday. The DXY falls 0.2% to 102.013 after hitting a near 18-month high of 102.535 Monday. ([email protected])0651 ET - The dollar eases as the euro recovers after French far-right presidential candidate Marine Le Pen promised to reduce the public deficit. Le Pen, who is ahead in opinion polls for next year's elections, unveiled detailed plans of a 140 billion euro package of spending cuts and tax rises. French yields fall 11 basis points to 4.761%, according to Tradeweb. The euro rises 0.2% to $1.1244 after reaching a 16-month low of $1.1160 Monday, LSEG data show. The DXY dollar index falls 0.2% to 102.004 after hitting a near 18-month high of 102.535 Monday. ([email protected])0539 ET - For nearly 15 years, governments, companies and investors have lived in a world where money seemed almost endlessly available and this era is coming to an end, Carmignac Chairman and CIO Edouard Carmignac says in a note. "Money has a price once again, and with it comes a discipline we may have been too quick to forget: the discipline of choice." This shift is taking place at a time when capital needs have never been greater. The U.S. must simultaneously finance a staggering public debt and a technological revolution with an extraordinary appetite for investment. Meanwhile, Europe "needs to finance its defense, its energy independence and its infrastructure, and find the capital to plug its technological gap." ([email protected])0520 ET - Julius Baer expects the Federal Reserve to deliver one final rate hike in December, followed by an extended pause, says chief economist David Kohl. The U.S. labor market cooled slightly in September, with overall job growth slowing and fewer than 50% of industries reporting job gains, among other indicators. Julius Baer now sees the December FOMC meeting as the most likely opportunity for the next 25bp rate hike. Financial conditions have tightened since the last FOMC meeting far more because of rising long-term yields and U.S. dollar appreciation than the increase in short-term rates, while the offset from higher equity markets has moderated, he says. ([email protected]; @ivy_jiahuihuang)0518 ET - The Turkish lira should remain under sustained depreciation pressure as the country's latest inflation data could encourage the central bank to cut interest rates on October 22, Commerzbank's Tatha Ghose says in a note. Data on Monday showed annual inflation eased to 29.7% in September from 31.5% in August which creates "the perfect background for Turkey's central bank to cut rates by 100 basis points later this month," he says. While interventions to prop up the lira could limit the extent of the currency's falls, further losses look likely, he says. The dollar rises 0.1% to 49.1752 lira after earlier reaching a record high of 49.1821, LSEG data show. ([email protected])0457 ET - The U.K's Debt Management Office is due to sell 1.25 billion pounds in September 2035-dated indexed-linked gilts at an auction at 0900 GMT which should see good demand, RBC Capital Markets' strategists say in a note. It seems likely that Tuesday's tap of this bond will be the last, which should be "supportive of strong demand," particularly as it follows strong results at the prior two taps of the bond, they say. In addition, inflation-linked bonds are attractive more broadly given that the energy prices risk rising further due to recent geopolitical developments and the difficulties facing the U.S. and Iran in reaching a peace deal, the strategists say. ([email protected])