The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0647 GMT - Eurozone government bond yields edge higher in opening trade as renewed military hostilities in the Middle East raise the prospect of oil supply disruptions again. Since Europe is a net energy importer, delivery bottlenecks could be inflationary, resulting in a risk of rising bond yields. Oil price volatility was also reflected in global bond yields Monday, and "we expect that the volatility will continue as the war continues," Danske Bank's Kristoffer Kjaer Lomholt says in a note. The 10-year German Bund yield is up 0.5 basis points at 3.150%, according to LSEG. (emese.bartha@wsj.com)
0644 GMT - Sterling rises following the surprise appointment of former U.K. defense secretary John Healey as treasury chief after Andy Burnham became prime minister Monday. "Healey had been voted as one of the more investor-friendly options for Chancellor in a recent Bloomberg survey, though there's little visibility on his fiscal views," Deutsche Bank analysts say in a note. Shabana Mahmood was widely expected to become treasury chief but will instead retain her role as home secretary. Burnham said in a speech Monday that he will unveil some of its policy measures and how he plans to pay for them Tuesday. Sterling rises 0.1% to $1.3448. The euro falls 0.1% to 0.8491 pounds. (renae.dyer@wsj.com)
0610 GMT - The spread between 10-year and two-year Treasury yields is expected to narrow further over the coming months, potentially leading to an inversion, Capital Economics' James Reilly says in a note. "We think that continued escalation in the Strait of Hormuz could lead to the curve inverting outright," the senior markets economist says. The flattening has been driven by real yields amid a surge in two-year real yields. "We expect the 2s10s curve to flatten in the coming months as investors' rate expectations rise further," he says. The yield spread between the 10-year and two-year maturities is currently 39 basis points, compared with 72 basis points at the beginning of the year, according to Tradeweb. (emese.bartha@wsj.com)
0553 GMT - Germany's launch of new October 2031-dated federal notes, or Bobl, on Tuesday deserves special attention after tepid demand seen at the last new 10-year Bund and new two-year Schatz auctions, Commerzbank's Hauke Siemssen says in a note. The roll is quoted close to 2.5 basis points, and the new Bobl thus seems "rather cheap," the rates strategist says. This argues for better demand at the upcoming 6 billion euros auction, he says. As for Bunds, despite this rather challenging market environment, the recent ranges in Bund yields have held for now, Siemssen adds. (emese.bartha@wsj.com)
0544 GMT - U.S. Treasury yields edge lower in line as oil prices decline slightly even as the Middle East conflict does not abate. Following the collapse of the U.S.-Iran Memorandum of Understanding for peace, "the conflict now largely revolves around control of the Strait of Hormuz," SEB's Maya Westerlund says in a note. However, the risk is a more prolonged stalemate, with continued uncertain energy flows, higher oil prices and recurring attacks, she says. The two-year Treasury yield falls 1.3 bps to 4.200%, while the 10-year yield declines 0.6 bps to 4.591%, according to Tradeweb. (emese.bartha@wsj.com)
0529 GMT - The bar for a further selloff in eurozone front-end government bonds is high, as market expectations of more than two further 25-basis-point rate hikes by the European Central Bank over the next 12 months are already priced in, Mediolanum International Funds' Niall Scanlon says in a note. "The front end has already repriced materially on the renewed inflation risk," the fixed-income portfolio manager says. The main risk to that view is a governing council that leans harder on gas-driven inflation than Mediolanum anticipates, Scanlon says. At this week's meeting, Mediolanum expects ECB President Christine Lagarde to reaffirm the commitment to the 2% target and flag upside inflation risks from energy, while stopping short of fully endorsing the additional tightening the market has priced. (emese.bartha@wsj.com)
0526 GMT - The recent volatility in inflation leading economic indicators (LEIs) is poised to push up stock-bond correlations, continuing a macro environment where bonds are less effective as equity diversifiers, Variant Perception says in a note. Variant's leading indicator for stock-bond correlations is ticking higher again, signaling positive expected correlations ahead, it says. "This has been driven by rising volatility of our inflation LEI," it says. More frequent inflation shocks tend to restrict central bank policy flexibility, resulting in slower policy responses to negative shocks and driving up stock-bond correlations, it adds. (emese.bartha@wsj.com)
0514 GMT - Speculation about Federal Reserve interest rate hikes is justified, DZ Bank analyst Christian Lenk says in a note. However, partly due to the latest inflation figures, which came in below analyst expectations in June, "this does not necessarily mean the Fed hikes," he says. Speculation regarding the key interest rates is also being reflected to some extent at the long end of the U.S. Treasury curve, albeit to a much lesser extent than at the front end, Lenk says. DZ Bank continues to expect volatility in 10-year U.S. Treasurys to remain moderate and expects the 10-year U.S. Treasury yield to drift lower to 4.40% on a 12-month horizon. The 10-year Treasury yield declines 0.4 basis points to 4.593%, according to Tradeweb. (emese.bartha@wsj.com)
(END) Dow Jones Newswires
July 21, 2026 02:47 ET (06:47 GMT)
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