U.S. Treasury, Eurozone Bond Yields Fall in European Trade — Market Talk
0725 GMT - Eurozone and U.S. Treasury yields fall as some investors find yield levels near multidecade highs attractive enough to tempt them to buy the bonds again. Investors in Europe focus on French government bonds, or OATs, where yields have jumped recently amid the budget debate and ahead of next year's presidential election. "The selling pressure in OATs seems to be subsiding and the decoupling with U.S. Treasurys is encouraging," Commerzbank's Christoph Rieger says in a note. An absence of French bond auctions this week helps, though caution is warranted, he says. The 10-year Bund yield falls 6.1 basis points to 3.435%; the 10-year OAT yield falls 9.8bps to 4.781%; the 10-year Treasury yield falls 2.3bps to 5.288%, according to Tradeweb. ([email protected])0712 GMT - The euro falls against the dollar but trades above Monday's multi-month low as the spread between French and German bond yields tightens. Far-right presidential candidate Marine Le Pen is expected to present her budget plans for 2027 on Tuesday. That means potentially more clarity on the fiscal outlook and the possibility of a deal on the budget, Danske Bank's Jens Peter Sorensen says in a note. The 10-year French-German yield spread trades at 138.32 basis points after reaching 158.67 on Friday, the highest level since November 2011, according to LSEG. The euro falls 0.1% to $1.1211 after dropping to $1.1160 on Monday, its lowest level in more than 16 months. ([email protected])0702 GMT - Bitcoin falls as the dollar rises on U.S. interest-rate rise expectations and as Middle East tensions persist. The U.S. ISM services purchasing managers' index fell to 54.9 in September from 55.4 in August but the prices paid index rose to 74 from 72.6, supporting the case for further rate hikes. That shows U.S. activity remains resilient even as it cools but persistent cost pressures mean inflation risks haven't disappeared, Zaye Capital Markets analyst Naeem Aslam says in a note. "With no major U.S. economic release scheduled today, we expect bitcoin to remain particularly sensitive to Treasury yields, the dollar, exchange traded fund flows and any fresh geopolitical developments." Bitcoin drops 0.6% to $85,297, LSEG data show. ([email protected])0654 GMT - Nordic markets are seen opening higher, with IG calling the OMXS30 up 0.7% at around 3280. The unusual recent trend of both rising bond yields and stock markets continued Monday, SEB economist Pia Fromlet writes. Technology stocks drove the stock-market rise, she says. Chinese markets are closed, but stock markets in Japan and Hong Kong are rising. Futures point to positive openings in Europe and the U.S. Tuesday, the French budget for 2027 will be formally submitted. "The hope is that the budget will show that France is on the right track and thus prevent the already elevated interest rate differential between French and German ten-year government bonds from spiraling further." OMXS30 closed at 3257.59, OMXN40 at 2595.90 and OBX at 1976.67. ([email protected])0649 GMT - Japan's Nikkei Stock Average rose 1.1% to 70683.98, closing above the 70000 threshold for the first time since July 1, despite continued uncertainty over the Iran conflict. Electronics and metals stocks led gains, driven by expectations for rising artificial intelligence-related demand. Advantest gained 3.8% and Fujikura climbed 5.2%. The dollar was at 158.21 yen, compared with Y157.91 as of Monday 5 p.m. Eastern time. Investors were focused on developments in the Middle East and crude oil prices. The 10-year Japanese government bond yield rose 2 basis points to 3.105%. ([email protected]; @kosakunarioka)0639 GMT - The dollar remains firm after reaching its highest level since April 2025 against a basket of currencies Monday, supported by U.S. interest-rate rise expectations and French debt concerns. While expectations for the Federal Reserve to raise rates later this month have been trimmed in recent sessions, markets are fully pricing a 25 basis-points rate increase by December and more than three moves next year, LSEG data show. Meanwhile, French fiscal worries have weighed on the euro and lifted the dollar as a safe haven. The DXY dollar index rises 0.1% to 102.259 after reaching as high as 102.535 Monday. ([email protected])0639 GMT - Asia's AI exports are showing signs of cooling, HSBC economists say in a research note. Asia's seasonally adjusted shipments of electronics have pulled back notably in recent months, including those from Taiwan, a key provider of chips, the economists say. Exports from South Korea are still rising, in part reflecting solid prices for advanced memory chips, while prices for other electronics along the AI hardware supply chain have started to cool, they note. The relentless rise in AI hardware, which has driven the gain in Asian export values, is easing too, they say. The slowdown may not be a surprise, they reckon, as after a sharp run-up in spending by U.S. hyperscalers, their capex growth is bound to slow.([email protected])0638 GMT - Economies in North Asia are facing a shift in constraints to supply from demand, HSBC economists say in a note. Supply-side pressures are intensifying, with component shortages, longer delivery times and elevated oil prices constraining production, say Frederic Neumann and Ines Lam. In Taiwan, South Korea and Japan, firms increased purchasing activity to support production, but supplier performance deteriorated, the economists say, based on September PMI data. Taiwan recorded one of the fastest deteriorations in vendor performance since early 2022, while Japan saw supplier delays worsen at one of the steepest rates of the past four years. South Korea is using finished products to meet orders, Taiwan is struggling to secure materials for future production, and Japan is building finished-goods stocks while shipments remain delayed, they note. ([email protected])0637 GMT - A 25bp rate hike from the RBI Wednesday is virtually a given, HSBC economists say. The bigger question is how to deliver a "credible hike" as markets are differentiating between credible and non-credible hikers. The RBI would thus need to convey more tightening is coming if needed to meet targets like 4% inflation. A 50bp hike could be alarming "especially since the previous policy had been perceived as dovish, and a sharp change may be unsettling." A 25bp hike accompanied by a cash reserve ratio move that takes out liquidity immediately--so it doesn't become inflationary--might look like a policy flip-flop. If aptly explained that RBI will remain data-dependent, a change in stance from "neutral" to something like "withdrawal of accommodation" could provide some cover. All told, the RBI's mission is enhancing credibility.([email protected])0553 GMT - Philippine inflation pressures broadened materially in September, underscoring increasingly evident second-round effects from energy shocks, Goldman Sachs analysts say. Increasing evidence that higher oil prices are seeping through across the economy points to the need for more interest-rate hikes by the central bank, especially as the Middle East conflict shows no signs of abating. "As a net food and energy importer, the depreciation of the Philippine peso in September likely added to cost pressures as well," GS says. It sticks to its call for 25bp hikes at both the October and December meetings, taking the policy rate to 5.5%. ([email protected])0548 GMT - Jefferies stays away from French government bonds. "Our fear is that as spreads move above 150 basis points, we could see some contagion risks not just to other French names, but also onto European peripherals," global economist Mohit Kumar says in a note. Deficit concerns should be a greater risk for investors than near-term inflation, he says. "Market is going after the weakest link in the deficit picture, which is France and the U.K." Jefferies's concern is a buyers' strike. Real-money investors, who buy bonds for long term, are unlikely to step in until there is more clarity, he says. Meanwhile, Asian investors, traditional buyers of French bonds, won't step in given the event risk of a possible rating downgrade, budget discussions and elections next year. ([email protected])0539 GMT - The U.S. Treasury yield steepens, with short-end yields falling and intermediate- and long-end yields rising in Asian trade as the bond selloff continues. Long-end yields are up on the day but remain below Monday's multidecade highs as the price of Brent oil hovers around $100 per barrel. The two-year Treasury yield declines 0.4 basis points to 4.828%, according to Tradeweb, as expectations of a Federal Reserve rate hike in October have retreated in recent days. Money markets currently price in a 24% probability of a 25-basis-point Fed rate hike this month, well below the 70% level seen Monday last week. The 10-year yield is up 0.4 basis points at 5.314%, while the 30-year yield is up 0.9 basis point at 5.672%, according to Tradeweb. ([email protected]) Corrections & AmplificationsThis item was corrected at 1:56 a.m. ET. The original version incorrectly said the 30-year yield was up 9 basis points.