The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0701 GMT - Financial institutions including pension funds and banks are about four years away from widespread bitcoin adoption, according to Matt Cole, CEO of bitcoin treasury firm Strive. "For most pension funds, the 3-year mark is when they start to actually look at an asset, not when they start to allocate to an asset," he says. He says it needs another four years to start seeing institutions adopt the flagship cryptocurrency in portfolios. "I think a lot of Bitcoiners would wish that was sooner, but these pools of capital move very slowly and deliberately," he adds. Bitcoin is broadly flat at $80,777. (joseph.wilkins@wsj.com)
0658 GMT - Federal Reserve Chairman Kevin Warsh's main focus is credibility, rather than trying to lean on the hawkish or the dovish side, Jefferies' Mohit Kumar says in a note. "That's the message we are likely to get today as well," the global economist says ahead of the Fed's interest-rate decision. If there are inflation risks, then the Fed needs to deliver, Kumar says. Jefferies banks on lower oil prices, forecasting prices to return to $60-$65 per barrel in two years' time. "Hence, it's not oil prices that should determine the medium term inflation outlook," Kumar says. (emese.bartha@wsj.com)
0658 GMT - The widening of the 10-year Italian BTP-German Bund yield spread since mid-September has resulted mainly from lower Bund yields, says Luca Cazzulani at The Investment Institute by UniCredit. "Spread widening in part reflected lower Bund yields and in part the pressure seen in [French government bonds] OATs," the head of strategy says. BTP yields have overshot the increase in implied rates volatility, which is a signal that the selloff is overdone, he says. The 10-year BTP-Bund yield spread closed at 110 basis points on Tuesday, having risen from low-80s levels in mid-September, according to LSEG data. (emese.bartha@wsj.com)
0635 GMT - TD Securities sees no change in U.S. Treasury coupon auction sizes at next week's quarterly refunding announcement, but it looks for Treasury to remove guidance about keeping auction sizes steady, rates strategists Gennadiy Goldberg and Molly Brooks write in a note. "A change in guidance doesn't mean the Treasury will change auction sizes immediately," they say. "A change in guidance should, however, put markets on notice that changes to auction sizes are coming." TD Securities expects Treasury to decrease 20- and 30-year auction sizes at the February 2027 refunding and increase 2-10-year auction sizes in May 2027. "We believe these changes will allow Treasury to gradually continue leaning away from long-end supply amid the rise in term premium." (emese.bartha@wsj.com)
0624 GMT - The U.S. Treasury's question to primary dealers to provide their perspectives on structural changes in investor demand and expectations for future auction sizes was an important step toward advancing the discussion around upcoming adjustments to Treasury issuance, Deutsche Bank strategists say in a note. The strategists' analysis of Treasury holdings data and portfolio weighted average maturity metrics suggests that "there has been a retrenchment in demand for long-dated Treasurys." This has been driven by a shrinking pool of buy-and-hold portfolios and a shift in preferences toward shorter maturities, they say. As Treasury faces higher borrowing needs over the coming years, and with market WAM near historical highs providing some flexibility, "there is a compelling case for more proactively shortening the maturity profile of future issuance," they say. (emese.bartha@wsj.com)
0619 GMT - A strong U.S. economy faces signs of a weakening labor market, as evidenced by recent payrolls and employment creation numbers, and this backdrop supports a wait-and-see approach by the Federal Reserve, KBRA's Joan Feldbaum-Vidra says ahead of the Fed's interest-rate decision. Additionally, normalized oil flows out of the Middle East tend to support medium-term compression of oil prices, although the risk of an escalation in conflict after the U.S. midterm elections are keeping oil prices elevated, the global head of sovereigns says. "Large-scale borrowing by AI companies and the U.S. Treasury are keeping yields high, helping do the Fed's job," she says. (emese.bartha@wsj.com)
0614 GMT - The Federal Reserve's patience should not be confused with complacency, Amundi Investment Institute's Alessia Berardi says. In line with the market, Amundi expects the Fed to keep interest rates on hold on Wednesday. "Admittedly, the labour market now looks less strong and market rates remain high," the head of global macroeconomics and emerging markets strategy says. However, the inflation outlook has not changed, so the Fed still has accommodation to remove, she says. (emese.bartha@wsj.com)
0606 GMT - U.S. inflation remains uncomfortably above the Federal Reserve's 2% target, and based on economic data, another hike would not be unreasonable, says Carmignac's Kevin Thozet in a note. Hence, reasons for the Fed to likely stay on hold Wednesday should be sought elsewhere, the member of the investment committee says. "Financial conditions have tightened, equities have wobbled and stress has appeared at the fringes of credit markets," he says. These factors provide reason for the Fed to pause, without necessarily signaling a shift toward a more accommodative stance, Thozet says.
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