The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1820 ET [Dow Jones]--Heartland's combination with TSB Bank is nearly complete, but Forysth Barr thinks it will need to work hard to reverse signs of sagging performance. Heartland needs final approval from New Zealand's central bank to complete the deal. Heartland hasn't updated on TSB's 1Q27 performance. However, analyst Ben Crozier notes TSB's June quarter showed a clear slowdown. Lending growth has fallen to near zero, net interest margin fell 20 basis points back to its long-run average, and operating expenditure was largely stable. "Rolling 12-month net profit is now 15% below the level Heartland quoted in its acquisition documentation," Forsyth Barr says. "Annualizing just the last six months puts net profit 26% below that level." So, improving TSB's performance is key for the merger to be successful, Forsyth Barr says. (david.winning@wsj.com; @dwinningWSJ)
1755 ET - The Reserve Bank of Australia appears primed to deliver a fifth interest rate increase this cycle at its policy meeting next week. Hawkish comments from bank officials and high 3Q inflation data have seemingly put a hike in the official cash rate to 4.85% from 4.60% currently beyond doubt. So hawkish and frequent has the rhetoric from the RBA been, there should already be a solid focus on the RBA's December 7-8 policy meeting. There's a lot at stake for the RBA's credibility and the economy as inflation rises. There's plenty of further public appearance planned in coming weeks too. A sixth hike would be very painful, but it can't be ruled out. (james.glynn@wsj.com; @JamesGlynnWSJ)
1723 ET - The big news out of the Federal Reserve's rate-setting committee meeting is Chairman Warsh's decision to take rate decisions off of the table for one of the Fed's eight meetings next year, BMO analysts say in a research note. Starting next fall, one of the FOMC's meetings will be dedicated exclusively to long-term strategy, according to Warsh, who didn't provide further details. "The specifics of what will be discussed at the 'strategy' or 'non-live' meetings weren't revealed and likely won't be known for some time," the analysts say. Warsh said he hoped to have two such meetings in 2028. (dean.seal@wsj.com)
1645 ET - Treasury Secretary Scott Bessent said he and President Trump have confidence in Fed Chairman Kevin Warsh's ability to balance the Fed's dual mandate of full employment and price stability. Bessent said the Fed should keep an 'open mind' regarding the transitory nature of the energy supply shock. When asked whether he would view any future interest rate hikes as a policy mistake, Bessent said that's not necessarily so. "The Fed, I believe, raised their terminology today in the statement," Bessent said on CNBC after the committee's decision to hold rates steady. "They seemed to insinuate that they believe that the economy is accelerating...I haven't seen it yet, but I think we're going to get a strong GDP number for the third quarter," Bessent added. (jessica.coacci@wsj.com)
1601 ET - Treasury yields move unevenly as the Fed meets expectations and keeps interest rates unchanged, while Chairman Warsh avoids forward guidance, as is his typical style. Markets now are pricing in a hike in December. GDP data and PCE inflation, both due tomorrow, could change that perception. The 10-year yield settles at 5.044%, up 0.052 percentage point from yesterday, its largest one-day increase in a month. The two-year ends up little changed from the previous session, at 4.731%, after falling sharply during Warsh's press conference. The WSJ Dollar Index goes from rising slightly to falling 0.1%. (paulo.trevisani@wsj.com; @ptrevisani)
1508 ET - While there were dissents from FOMC members Cook and Hammack, Evercore ISI finds it interesting that Logan, Barr and Kashkari did not dissent in the Fed's decision to leave rates unchanged. "We read this as broad acceptance that a quarterly pace that gives time to learn is acceptable. And we suspect Logan's position signals wider sensitivity to financial conditions," the economists say. They add that they believe governor Cook is one of several governors "who are not big fans of Warsh and have at points this year tried to press him on hikes." But the economists say they don't think her decision to dissent indicates the center of the FOMC "is more hawkish than we thought." (patrick.sheridan@wsj.com)
1459 ET - Federal Reserve Chairman Kevin Warsh is committing to eight policy meetings for the Fed's rate-setting committee next year, though he says one of those meetings will be focused exclusively on strategy. "The rest will be regular FOMC policy meetings," Warsh says at a press conference following the FOMC's decision to hold rates steady. His comments suggest that the strategy-focused meeting in 2027 won't entail a vote or policy statement. For 2028, Warsh says he wants to do two meetings dedicated to strategy discussion and six normal meetings for policy changes. (dean.seal@wsj.com)
1437 ET - The dollar is unmoved by the Fed's decision to hold rates steady, which was widely expected. Two FOMC members dissent to vote for a hike. "We think the smaller-than-expected number of dissents and cautionary language inserted at the end of the statement should be read dovishly on the margins," Corpay's Karl Schamotta writes. He adds that "[the] cross-currency rate differentials that helped support the dollar's gains earlier this autumn are likely to hold firm for now." The WSJ Dollar Index rises 0.1% as the greenback strengthens 0.2% versus the yen while weakening 0.1% against the euro.(paulo.trevisani@wsj.com; @ptrevisani)
1434 ET - Fitch Ratings says the global credit risk environment has declined since the publication of its last Global Risk Outlook, citing emerging threats to AI capex and geopolitical risks in the Middle East. The agency also said tightened funding conditions are among the factors pointing toward a more heightened risk environment heading into 2027. Fitch says its base case is for yields to stabilize, with the U.S. 10-year Treasury yield falling back to 4.8% by the end of next year, but added there are risks to the upside. These include the possibility of higher oil prices should shipments through the Straits of Hormuz continue to be hampered next year, Fitch says. (stephen.nakrosis@wsj.com)
1422 ET - The Fed left interest rates unchanged, but subtly changed its assessment of the economy. Its October policy statement described economic activity as expanding at a "strong" pace, compared with "solid" in September. The change suggests officials see growth as more robust than they did at their previous meeting, ahead of Thursday's GDP data. "We expect two additional 25bp hikes, in December, and March 2027, to take the fed funds rate to a terminal rate of 4.25-4.5%, slightly below current market pricing," a note from Oxford Economics says. (jessica.coacci@wsj.com)
1422 ET - Treasury yields edge higher as the Fed holds rates unchanged, as expected. FOMC members Lisa Cook and Beth Hammack dissent to support a hike. The post-meeting statement says economic activity is expanding at a strong pace, adding that spending has been resilient, productivity is strong, capital investment is robust and job gains "have kept pace with the workforce," while inflation remains elevated. It states, however, that uncertainty remains elevated due, in part, to "geopolitical developments." The 10-year yield reaches an intraday high of 5.04% following the decision and ahead of Chairman Warsh's presser. The two-year is at 4.78%. (paulo.trevisani@wsj.com; @ptrevisani)
1419 ET - U.S. stocks are mostly higher, but the Nasdaq falls into negative territory following the Fed's decision to leave rates unchanged. FOMC says, "Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient." The statement says job gains have kept pace with the workforce, and the unemployment rate has changed little. There were dissents from Cook and Hammack, which BMO said recently could be a way to signal "hawkishness without forward guidance." The DJIA is up 0.2% and the S&P 500 gains 0.1% while the Nasdaq slips 0.2%.
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