Treasury Selloff Eases, Yields Fall Amid Declining Oil Prices — Market Talk
0858 ET - Treasury yields slip as a global bond selloff eases amid a 3% decline in oil prices. Borrowing costs, however, remain close to recent highs, as markets worry about inflation, government spending and corporate borrowing. The U.S. trade deficit widens more than expected in August, to $105.6 billion. The Treasury is auctioning $58 billion in three-year notes and elevated yields are expected to ensure robust demand. The 10-year yield trades at 5.273%, down from yesterday's settlement of 5.310%, which was the highest since April 2002. The two-year falls to 4.785% from 4.831%. ([email protected]; @ptrevisani)0852 ET - Sterling looks vulnerable ahead of the October 28 U.K. budget, Morgan Stanley strategists say in a note. The budget could bring a delay to the consolidation process and lower fiscal headroom, they say. "We see risks to our estimates as skewed towards a bigger headroom hit, as we don't incorporate any major adjustment from lower immigration flows." This implies some insufficient pricing of fiscal risks in sterling, they say. Morgan Stanley recommends selling sterling against the dollar with a target of $1.2850 and a stop loss of $1.3350. Sterling is last up 0.5% at $1.3279. ([email protected])0810 ET - Central 1 Credit Union anticipates the Bank of Canada will raise interest rates twice, and won't make its first move until early next year, despite financial markets pricing in a more aggressive rate cycle. Economist Bryan Yu says the country is in a period of high uncertainty and the outlook is fluid, with soaring bond yields, tariff impacts and high oil-price volatility. Canadian core inflation remains near 2% and economic growth is likely to slow in late 2026 with trade uncertainty, with higher bond yields tempering a housing-market recovery, Yu notes. ([email protected]; @RobbMStewart)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])