The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0904 ET - Treasury yields fall alongside oil prices as the U.S. increases sanctions on Iran. Crude futures fall 3% and Brent trades below $90. The WSJ Dollar Index gives away overnight gains and is flat, while Bitcoin briefly jumps above $80,000, amid growing concerns that Washington will tolerate high inflation and expanding fiscal deficits. Consumer confidence data is on tap later this morning. The Treasury auctions $69 billion in two-year notes at 1 p.m. ET. The 30-year yield falls to 5.198% from an overnight high of 5.246%, the 10-year slips to 4.668% from 4.710% and the two-year drops to 4.240% from 4.255%. (paulo.trevisani@wsj.com; @ptrevisani)
0847 ET - Bitcoin eases back below $80,000 as its recent rally loses steam. The cryptocurrency last trades steady at $78,950, having risen to a three-month high of $81,237 overnight, LSEG data show. Bitcoin's recent gains are driven by the U.S. Treasury's announcement last week that it would increase buybacks of long-term debt along with President Trump urging lawmakers to pass the Clarity Act bill for crypto regulation. The rally from levels around $64,000 at the start of last week signals speculative liquidity is quietly returning to alternative asset classes, Tickmill Group's Patrick Munelly says in a note. While a drop in crude prices and a pause in rising Treasury yields offer brief breathing room, the structural narrative is shifting toward fiscal discipline, debt monetization, and currency debasement where investors seek alternative assets, he says. (renae.dyer@wsj.com)
0835 ET - The Hungarian forint stays weaker against the euro after Hungary's central bank cut its base interest rate by 25 basis points to 5.50%, as expected by many analysts. A rate cut was never in doubt with the central bank having signalled policy easing at the June meeting, Capital Economics economist William Jackson says in a note. "The main surprise since then is that inflation has trended lower than both we and the National Bank (MNB) had expected." Capital Economics expect a further 75 basis points of rate cuts, taking the policy rate to 4.75% by year-end. The euro rises 0.3% to 362.07 forints, little changed from levels before the decision. (renae.dyer@wsj.com)
0705 ET - A change in the profile of government bond investors from less price sensitive buyers such as central banks to more price sensitive investors could mean long-dated bond yields stay higher, Nuveen's Laura Cooper says in a note. Rising government bond issuance means investors are likely to demand extra compensation to absorb the additional supply, she says. Short-dated and medium-dated government bonds look more attractive than long-dated bonds as they offer "most of the income with far less exposure to a supply and demand story that has yet to be resolved." (miriam.mukuru@wsj.com)
0651 ET - The lack of clear direction on Federal Reserve policy has pulled the U.S. Treasury market in two directions at once, TwentyFour Asset Management's David Norris says in a note. "Inflation concerns are weighing on the long end, while uncertainty about the Fed's willingness to act is keeping short-term interest rates relatively stable," the portfolio manager says. At the Federal Reserve Bank of Kansas City's Jackson Hole symposium later this week, Fed Chairman Kevin Warsh is likely to provide an update on his five working groups, Norris says. "Above all, however, Warsh must set a clear tone and clarify the Fed's monetary policy objectives." (emese.bartha@wsj.com)
0616 ET - The question everyone is wondering is whether Federal Reserve Chair Kevin Warsh will use his Jackson Hole speech to provide more clarity on monetary policy, Franklin Templeton Fixed Income's Sonal Desai says in a note. "I think he will not," the CIO says. Warsh has abandoned forward guidance and wants financial markets to assess the economic outlook rather than take their cues from a Fed that signals its moves ahead of time, Desai says. However, Warsh has faced pushback from analysts who want him to clarify the Fed's 'reaction function,' namely what data it will react to and how, Desai says. "But I don't think Warsh will do this, because it would be the same as providing forward guidance." (emese.bartha@wsj.com)
0547 ET - The climb in the Ifo business-climate index to its highest in a year is a "huge surprise", KfW Research economist Sebastian Wanke says. "After all, despite all the challenges, this marks the fourth consecutive increase," he says. The economy is therefore showing resilience to the war in Iran and more recently the low water levels on the River Rhine. The increase in manufacturing orders had already hinted at this, and Ifo survey's data suggests the positive trend is continuing, Wanke says.KfW Research now expects GDP growth of 1.1% for this year and 1.5% for 2027, 0.4 and 0.2 percentage points higher, respectively, than in the last forecast in May, he says. (edward.frankl@wsj.com)
0546 ET - Eurozone bond yields remain caught between higher energy prices and the limited evidence of the second-round effects required to justify the amount of tightening now embedded in market pricing, Mizuho's Evelyne Gomez-Liechti says in a note. Neither Tuesday's German Ifo data nor the German Schatz auction should materially change the broader European Central Bank debate, the multi-asset strategist says. The 10-year Bund yield falls 2.0 basis points to 3.231%, according to Tradeweb. (emese.bartha@wsj.com)
0542 ET - Recent resilience suggests the German economy is on track for its best GDP growth performance since the 1.9% of 2022, ING's Carsten Brzeski says in a note. The Ifo business-climate index rose to 88.8 in August from 86.6 in July, and data showed second-quarter growth was revised upward to 0.3% from 0.2%. "While it's still too early to call this a self-sustained economic recovery, growth above potential in the first and second quarters of the year, together with four consecutive months of increasing sentiment, are promising," he says. Still, the short-term outlook includes high energy prices, alongside low water levels stymieing river transport for German industry. However, order books have started to recover in recent months, pointing to some positive momentum, Brzeski says. (edward.frankl@wsj.com)
0542 ET - The Hungarian forint falls against the euro as analysts widely expect the country's central bank to cut interest rates by 25 basis points to 5.50% in a decision at 1200 GMT, Commerzbank's Tatha Ghose says in a note. The communication will be more important than the decision itself, he says. The forint could stay under pressure if the central bank signals further rate cuts as soon as September, he says. However, the central bank is likely to sound more cautious on policy easing, he says. "A more conditional tone will reassure investors that [Hungary's central bank] may soon ditch the rate-cutting cycle if inflation risks were to stay elevated. " The euro rises 0.5% to 362.45 forints. (renae.dyer@wsj.com)
0538 ET - U.S. Treasury yields edge lower in European mid-morning trade while the dollar is steady as investors digest the Treasury's decision to increase long-end debt buybacks and its plan to economically isolate Iran. "Financial markets are heading into a heavy run of catalysts following their reaction to Treasury Secretary Scott Bessent's moves on long-dated Treasury buybacks and the latest sanctions against Iran," says the The Revacy Fund's Zaheer Anwari in a note. Treasury yields remain at elevated levels as markets await the next round of U.S. economic data, he says. The 10-year Treasury yield falls 1.6 basis points to 4.886%. The DXY index is stable at 99.028. (emese.bartha@wsj.com)
0529 ET - Concerns about the prospect of dollar debasement in the wake of the U.S. Treasury's decision to buy back more long-term bonds might be overdone, MUFG Bank analysts say in a note. Dollar debasement involves investors seeking alternative assets due to the concerns about the currency being devalued. "While fiscal concerns, Treasury buybacks and record debt levels continue to support the debasement narrative, historical experience suggests caution in extrapolating to U.S. asset selloff," the analysts say. As long as yields remain elevated, the more likely outcome is that the dollar stabilizes, they say. The DXY dollar index trades steady at 99.016, having reached a three-month low of 98.557 on Thursday.
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