Treasury Yields Fall in Week as Turmoil Subsides — Market Talk
1552 ET - Treasury yields fall this week as bond markets turbulence subsides. Fed officials signal no rush to raise rates, while Chairman Warsh stays away from guidance. Derivatives indicate investors' one-year inflation expectations drift away from the Fed's 2% target and reach 2.64%, the highest since June, according to LSEG. U.S. industrial production increases more than expected in September. Oil rises 3.5%. The 30-year has its largest weekly decline since April 2025, falling 0.162 percentage point to 5.436%. The 10-year falls 0.146 point to 5.097% and is down for two consecutive weeks. The two-year sheds 0.055 point to 4.734%, down for three straight weeks. ([email protected]; @ptrevisani)1331 ET - Major cryptocurrencies are weaker, with sizably-lower volumes seen in afternoon trading, according to data from Coinglass. Trading volumes for bitcoin over the past 24 hours are off 39%, to $49.2 billion. Other tokens are seeing larger decreases in volume, with ethereum volume off 42% to $34.3 billion, HYPE volume down 41% to $1.8 billion, and XRP falling 42% to $2.1 billion. Outflows in bitcoin futures have picked up in the last 5 minutes, according to Coinglass--with outflows seen at $75.2 million and inflows at $31 million. Bitcoin is down 1% to $81,177, ethereum falls 1.3% to $2,419, and XRP slides 2.8% to $1.30. ([email protected])1235 ET - Weaker activity will likely give Brazil's central bank room to keep cutting its hefty interest rates, TS Lombard's João Pedro Oliveira Fachetti says in a note. He expects the BCB to shave a quarter of a percentage point on November 4 and another in December, bringing the Selic rate to 13.25% by year end, while "further cuts hinge on the approval of structural reforms." President Lula da Silva faces right-wing challenger Flavio Bolsonaro in the final round of vote on October 25 in a tight race. Bolsonaro is seen as a fiscal hawk and Fachetti says his eventual victory could strengthen the Brazilian real, helping contain inflationary pressures. The real climbs 0.3% against the dollar. ([email protected]; @ptrevisani)1139 ET - Solana, the crypto token with the fifth-largest market capitalization in the market, excluding stablecoins, is supported by a transaction speed that's exponentially higher than its competitors, says Zach Pandl of Grayscale in a note. Pandl says that solana averages roughly 1,400 transactions per second, well exceeding the next-fastest competitor Binance Coins's 200 transactions per second, and other crypto tokens at speeds of roughly 40 transactions per second. Solana's transaction speed is scheduled to accelerate next week with the introduction of its so-called 'Alpenglow' upgrade, which Pandl says will put the token further ahead as a blockchain for developers to use speed-wise. After trading higher earlier in the day, solana is now down 1.3% to $104.17. ([email protected])1120 ET - A weaker USD index is giving many major cryptocurrencies support. This week has seen bitcoin and other crypto tokens responding more to macro market moves and less to how tech and AI stocks move, says Colin Basco of Coinbase Institutional in a note. "Bitcoin's correlation with chip stocks has also fallen to well under half its January peak, indicating that the market is no longer treating bitcoin as a leveraged proxy for technology stocks," says Basco. He adds that spot demand for bitcoin and other cryptocurrencies remains the "soft spot" for prices, especially as odds for a rate hike before the end of the month are seen rising. Bitcoin is up 0.1% to $82,106, while ethereum rises 0.4% to $2,460. ([email protected])1109 ET - A solid rise in U.S. industrial production in September still leaves some lukewarm indicators. Production rises 0.7% in the month. Citi's Veronica Clark and Andrew Hollenhorst say in a note that "manufacturing production has moved mostly sideways since the spring and remains below production levels of 2014-18." They add that manufacturing production rose "a more modest" 0.3%. "While strong AI-demand has boosted business investment, much of this investment is imported, implying domestic production has not been as strong," Clark and Hollenhorst say. They add that higher interest rates and fading fiscal support represent headwinds to non-AI manufacturing into 2027. ([email protected]; @ptrevisani)1033 ET - Unlike in recent years, the British economy has sustained its early-year momentum into the second half of 2026, Oxford Economics' Andrew Goodwin says in a note. "This likely reflects a combination of genuine strength due to structural change because of IT-related investment, but also noisy data," he says. Rapid increases in AI usage mean recent IT strength will likely endure, though strong pickup in professional services output in the last six months is harder to explain. Any resilience will come under pressure over the next few quarters, particularly given most of the impact of the Middle East war is still to come. Financial conditions have worsened, and fiscal policy is being tightened, he adds. ([email protected])1026 ET - If Albertans and Quebecois did vote to leave Canada, what would that mean for the rest of the country? Capital Economics' Bradley Saunders argues the blow to GDP from losing Quebec industry and Alberta oil and gas could be mediated somewhat by continued free trade, companies relocating from seceding provinces to the rest of Canada and a weaker Canadian dollar boosting export competitiveness in other sectors. As such, the economist expects the rest of Canada to outperform the two provinces, whose newfound independence would likely require fiscal tightening. Of course secession would be a lengthy and complicated process without precedent and as such there remains a lot of uncertainty, Saunders says. ([email protected]; @RobbMStewart)1026 ET - Canada's housing market remains soft, with a combination of higher fixed mortgage rates and potential Bank of Canada tightening likely keeping buyers on the defensive, Bank of Montreal's Robert Kavcic says. The economist continues to argue that market pricing of a percentage point in interest rates increases in 2027 is too aggressive, but says the balance of risk is tilting to the upside for variable rates into the coming spring market for housing. "This poses an issue for the market given that variable rates are currently the lowest available by a relatively wide margin, and most buyers have pivoted to that space," he says. ([email protected]; @RobbMStewart)1024 ET - Elevated oil prices boosted Canada's purchasing power but the gains are uneven across the country, Royal Bank of Canada says. Real gross domestic income expanded 3.1% on-year in 2Q, nearly triple the pace of real GDP growth after a 46% surge in oil added about C$12 billion a quarter to export revenue. Royal Bank says oil producers and resource-rich provinces are capturing a disproportionate share of the initial windfall, while most households face higher costs without offsetting income gains. This complicates monetary policy, since the Bank of Canada controls only one interest rate for the entire country, Royal Bank adds. ([email protected]; @RobbMStewart)1018 ET - The rise in mortgage rates has sent Canada's housing market into reverse, with sales and prices both falling in September, says Capital Economics' Stephen Brown. With the risk mortgage rate rise further prices could fall a bit more in the coming months, though Brown doesn't anticipate the Bank of Canada will lift its policy rate as aggressively as markets are pricing in. Lenders have been forced to pass on higher funding costs to fixed mortgage rates. Yet while home prices may fall near term, Brown says he is more upbeat about the outlook from mid-2027 as mortgage rates drop back next year. ([email protected]; @RobbMStewart)1011 ET - The widening of spreads between French and German government bond yields has had as much, or possibly more, negative impact on the euro as widening Treasury-German spreads, Standard Chartered's Steve Englander says in a note. "Rising French credit default swaps (CDS) also have a significant impact on euro; although the relationship is not as tight as with the French-German spread, the CDS correlation still supports the view of concerns about France's government finances." The euro faces renewed depreciation if spreads widen further, he says. The euro rises 0.3% to $1.1256 after hitting a 17-month low of $1.1112 Wednesday, LSEG data show. ([email protected])