The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0551 GMT - Markets will look to the upcoming Federal Reserve meetings to see if Chairman Kevin Warsh will follow through on his inflation concerns, Danske Bank analysts say in a note. The Scandinavian bank's analysts interpret Warsh's view of the economy as inflation being above target, financial conditions aren't clearly restrictive, the labor market is steady, and growth is generally solid but uneven across sectors, they say. Against this backdrop, Danske Bank analysts continue to expect the Fed to raise interest rates in December and March, but they see the risk tilted toward earlier hikes. (emese.bartha@wsj.com)
0547 GMT - The 10-year U.S. Treasury yield rises to 4.786%, the highest level since January 2025, in Asian trade, as the selloff in the global bond market continues on the back of flared-up hostilities in the Middle East, adding to inflation fears. "Global government bond yields continue to rise on the back of the recent statements from Federal Reserve and European Central Bank officials as well as a renewed rise in the oil price and the solid supply in the primary market during August and the start of September," Danske Bank analysts say in a note. Treasury yields rise across maturities, with the two-year yield up 0.8 bps at 4.356%, having touched 4.365% earlier in the day, the highest since late July, according to LSEG. (emese.bartha@wsj.com)
0519 GMT - Money markets' high expectations of an interest-rate hike at the Federal Reserve's September meeting might be excessive, according to Nomura Asset Management International, which continues to expect the Fed to hold rates this month. Fed Chairman Kevin Warsh's positive assessment of task force check-ins could make the October or December meetings "live" for potential action, however, says Greg Gizzi, head of fixed income and municipal bonds. "The probability of a hike at one of those meetings has certainly increased, though any move remains contingent on incoming data," he says. Money markets currently price in 65% probability of a rate hike at the Sept. 16 meeting, according to LSEG. (emese.bartha@wsj.com)
0517 GMT - While decidedly hawkish in tone, Federal Reserve Chairman Kevin Warsh's speech at Jackson Hole provided useful clarity on the central bank's framework, Nomura Asset Management International's Greg Gizzi says. PCE remains the Fed's preferred inflation measure, the 2% target is fixed and non-negotiable, and the policy rate remains the primary monetary tool, the head of fixed income and municipal bonds says. "The hawkish messaging was unmistakable, with the chairman stating he would be 'hard pressed to describe broad financial conditions as restrictive' and noting that credit and loan activity show little evidence of restraint." However, Warsh's rhetoric echoes previous press conferences and may not signal an imminent policy shift, Gizzi says. (emese.bartha@wsj.com)
0508 GMT - Japan's 10-year government bond auction shows mixed signs as monetary policy uncertainty in the U.S. and Japan rattles global fixed-income markets. The auction's tail--the difference between the average and lowest accepted prices--narrowed to 0.12 from 0.46 at the previous sale in August. The bid-to-cover ratio, another key gauge of investor demand, also improved to 3.29 from 2.56. However, the lower-than-expected minimum accepted price signals underlying caution among buyers as Bank of Japan rate-hike expectations stoke yield volatility and raise prospects of higher yields. The benchmark 10-year JGB yield briefly rose to 3% on Tuesday for the first time since September 1996. (megumi.fujikawa@wsj.com)
0508 GMT - Federal Reserve Chairman Kevin Warsh's comments at Jackson Hole reinforced the Fed's commitment to the 2% PCE inflation target, and the market responded by assigning a higher probability to rate hikes down the road, Madison Investments' Mike Sanders says in a note. "Warsh appears focused on using the Fed funds rate as the primary policy tool, keeping the Fed focused on the front end of the yield curve while the Treasury deals with other parts of the curve," the head of fixed income says. If the Fed is going to raise rates sometime in the next three to six months, that is already reflected to some degree in the five- to seven-year part of the curve, where real yields remain attractive, Sanders says. The PCE indicator is the Fed's preferred gauge of inflation. (emese.bartha@wsj.com)
0501 GMT - Bitcoin edges lower in Asia, staying below $80,000 as rate-hike expectations weigh. It's going to be a cautious few weeks for Bitcoin ahead of the Fed's next meeting, where markets are pricing a 25bp hike at about 65%, says IG's Tony Sycamore. One hike in isolation should not be a gamechanger as Bitcoin looks to build on its August rally, the analyst says. But two or three might be, and at this point IG sees about 60bp of Fed rate hikes priced by June 2027. From a technical perspective, dips back into the mid-to-low $70s will likely be well-supported, says Sycamore. A sustained break above the $81,500/$83,000 resistance area will be needed to signal that a move toward $95,000-$100,000 is underway. Bitcoin slip 0.2% to $78,725.
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