The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0914 GMT - The U.K. government is expected to pay historically high yields in order to attract buyers for the January 2056 gilt syndication on Tuesday, Lale Akoner, eToro global market strategist says. "The syndication is a rather uncomfortable reminder of how expensive the U.K.'s fiscal position has become," she says. Markets will analyze the gilt syndication for an indication of investors' appetite for U.K. government bonds, given concerns about rising public borrowing and inflation fears, she says. "A well-covered deal would show that investors are still willing to absorb long-dated U.K. debt at these yields, but still, it does not remove the underlying problem." Thirty-year gilt yields rise to a one-week high of 5.847%, LSEG data show. On Sept. 2, they hit 5.921%, their highest since 1998. (miriam.mukuru@wsj.com)
0855 GMT - Data overnight showing an upward revision to Japanese second-quarter annualized GDP growth to 1.4%, from the initial estimate of 1.1%, adds to prospects of higher Japanese interest rates and provides a further boost to the yen, Mizuho's Evelyne Gomez-Liechti says in a note. The yen jumps to a six-month high against the U.S. dollar, boosted by expectations of faster Bank of Japan rate increases and the potential for domestic investment inflows. The revised data, alongside an improvement in wage growth, raise the prospects of the Bank of Japan increasing rates in September, Gomez-Liechti says. The dollar falls 0.3% to last trade at 153.94 yen, having hit a six-month low of 152.87 earlier, LSEG data show. (miriam.mukuru@wsj.com)
0828 GMT - Yields on U.K. government bonds rise by more than their eurozone equivalents ahead of a sale of the January 2056 gilt via syndication. Concerns about the U.K.'s stretched public finances and uncertainty around the government's fiscal plans ahead of the October 28 budget are causing investors to demand a risk premium on U.K. government bonds. Tuesday's transaction will be a measure of investors' appetite for gilts. Ten-year gilt yields climb 2.4 basis points to last trade at 5.197%, Tradeweb data show. Ten-year Bund yields rise 1.3 bps to 3.394%. (miriam.mukuru@wsj.com)
0807 GMT - China's labor market isn't as weak as it looks, Capital Economics says in a research note. While the PMI employment component still points to companies cutting headcount, it reflects a structural decline in labor supply rather than cyclical weakness in labor demand, CE says. "Our Labour Market Indicator points to still-firm cyclical conditions, while a structural shift in labour demand towards high-tech, high-skilled sectors is also supporting wage growth," it says. That shift is likely to support household income and spending over the coming quarters, CE says. (tracy.qu@wsj.com)
0732 GMT - Yields on U.K. government bonds, or gilts, climb as investors await the reopening of the January 2056 gilt via syndication on Tuesday. Traders could demand a higher risk premium to buy the gilt, given U.K. inflation concerns due to high energy prices, and fiscal pressures, Mizuho's Evelyne Gomez-Liechti says in a note. The outcome of the gilt syndication is likely to set the tone for the gilt yield curve, Gomez-Liechti says. "A strong book would help stabilize the 30-year gilt sector," she says, "But we would not read too much into demand unless the bond performs after pricing." U.K. 30-year gilt yields rise 1.1 basis points to last trade at 5.826%, Tradeweb data show. (miriam.mukuru@wsj.com)
0717 GMT - Bitcoin declines, reversing last week's rise when it hit an over three-month high of $82,164, as investors become cautious. Uncertainty around the U.S. Federal Reserve rate decision on Sept. 16 is causing traders to take precaution, IG's Chris Beauchamp says in a note. Markets price in a 57% chance of a Fed rate increase this month, LSEG data show. Bitcoin falls 1.2% to last trade at $78,298. (miriam.mukuru@wsj.com)
0713 GMT - The dollar falls to a two-week low against a basket of currencies as strong gains for the Japanese yen continue. The yen jumps to a six-month high against the U.S. currency, boosted by expectations of faster interest-rate increases by the Bank of Japan and potential for domestic investment inflows. "This still looks primarily like a yen story rather than evidence of a broader shift in sentiment towards the dollar," ING's Francesco Pesole says in a note. Investors meanwhile await Friday's U.S. inflation data, he says. The DXY dollar index is last down 0.3% at 98.882, having hit a low of 98.716. The dollar hit a six-month low of 152.87 yen in Asian trade, according to LSEG data. (jessica.fleetham@wsj.com)
0658 GMT - Potential trade restrictions on Chinese companies are likely to have limited impact on China's exports, according to Barclays economists in a research note. AI-related trade frictions may intensify, the economists say, referring to reports about the Trump administration considering restrictions on select Chinese data-centre components. Barclays believes the impact will remain limited given "the small export share of the targeted products and the increasing diversification of Chinese exporters into other fast-growing markets," the bank says. (tracy.qu@wsj.com)
0648 GMT - Eurozone government bond yields are marginally lower, awaiting the European Central Bank's interest-rate decision and potential hints at the future policy path on Thursday. A 25 basis-point rate increase is fully priced in, according to LSEG. However, investors will want to know whether the ECB is overly concerned about further inflation risks and thus whether it is ready to raise rates further in the coming months. The widely-expected 25-basis-point hike would bring the deposit rate to 2.50%. The 10-year German Bund yield edges lower by 0.3 basis points to 3.379%, while the 10-year French OAT yield is down 0.1 basis point at 4.244%, according to Tradeweb. (emese.bartha@wsj.com)
0647 GMT - China's exports are likely to remain a key growth support in 2H, according to Barclays economists. Full-year exports are likely to grow around 20%, up from 17.6% in 1H, helping to partially offset weak domestic demand, they say in a research report. "We think external demand will continue to benefit from the global AI investment cycle and energy transition, supporting sectors such as EVs, power equipment, robotics, and data-centre-related infrastructure," the economists say. Industry reports continue to point to robust export order backlogs across a range of AI- and green-tech-related products, they add. (tracy.qu@wsj.com)
0557 GMT - The Philippine peso is unlikely to strengthen significantly as there are limited catalysts, UOB Global Economics & Markets Research analysts say in a report. The peso has been hitting record low against the dollar in recent weeks. Its underperformance largely reflects the Philippines' vulnerability to higher energy prices, supply security and the Fed's policy trajectory. Investor sentiment could also still be weighed by persistent macroeconomic imbalances as well as domestic, political and policy uncertainties. The dollar was last 0.1% lower at 62.507 pesos, LSEG data shows.(amanda.lee@wsj.com)
0553 GMT - Jefferies maintains concerns about long-end bonds, given potentially more risks from inflation and fiscal expansion, global economist Mohit Kumar says in a note. "We have been in the optimistic camp for the [U.S.-Iran] war and still believe that a deal, even if it's a fudge, may be feasible before the [U.S.] mid-terms," he says. "But we would still have the impact from El Nino and food prices," he says. In 2027, over 60% of European GDP is going through an election cycle, which implies a likelihood of fiscally supportive measures, Kumar says. "Hence, while we think that we could get a pullback in yields in the near term, our medium term view remains one of avoiding the long end and favoring steepeners on the curve."
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