The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0854 ET - French corporate bonds look favorable due to their cheap pricing, BNP Paribas' Viktor Hjort says in a note. Markets appear to be overpricing French risk, Hjort says. French growth is likely to remain stable over the coming months and the budget is likely to be passed, which means the risk premium on French credit is overpriced, he says. "French banks' exposure to sovereign risk is materially lower than Italian or Greek banks during the eurozone crisis," Hjort says. (miriam.mukuru@wsj.com)
0853 ET - Corporate borrowers with stronger financial positions could crowd out weaker borrowers as debt supply rises, BNP Paribas' Viktor Hjort says in a note. Corporate bonds' supply is expected to rise considerably over the coming year as AI spending grows, he says. Investors are demanding extra compensation for buying bonds as governments and companies issue more debt. (miriam.mukuru@wsj.com)
0847 ET - U.S. corporate bond issuers are paying higher premiums to attract bond buyers as companies issue more debt, BNP Paribas' Viktor Hjort says in a note. Rising corporate debt supply to fund AI-linked expansion is causing investors to demand higher compensation for buying bonds. "Funding investments across hyperscalers, data centers, AI labs, semiconductors and power will push corporate bond supply materially higher in the coming year," Hjort says. (miriam.mukuru@wsj.com)
0705 ET - The cost of euro credit default protection declines due to an improvement in market sentiment as oil prices retreat. Lower oil prices are offering relief to investors and supporting appetite for risk assets, XTB's Kathleen Brooks says in a note. The iTraxx Europe Crossover index of euro high-yield credit default swaps declines 4 basis points to 322bps, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0656 ET - For bond markets, the U.S. midterm elections are likely to trigger short-term market noise rather than a sustained repricing, Nuveen's Laura Cooper says in a note. "Their impact on the markets will depend largely on potential shifts in fiscal policy--a sphere where the scope for action appears limited, given the already strained debt dynamics and high financing costs," the head of macro credit and global investment strategist says. Historically, there is little evidence to suggest that midterm elections serve as a reliable indicator for Treasury yields, she adds. In the current bond market environment, a divided government might offer investors some reassurance by limiting the scope for further fiscal expansion and easing pressure on the long end of the Treasury curve, Cooper says. (emese.bartha@wsj.com)
0656 ET - Bitcoin is facing a significant test of investor confidence after cryptocurrency exchange Binance was hit by a record $6.3 billion hack Thursday, Zaye Capital Markets analyst Naeem Aslam says in a note. "Although the exchange has maintained that customer balances remain protected and initiated the reopening of withdrawals, the incident has renewed concerns about centralized exchange security, liquidity management, and institutional counterparty exposure," he says. Binance users pulled $4.9 billion from the crypto exchange by Monday after services resumed Sunday, the FT reports, citing figures from data platform DefiLlama. Bitcoin trades steady at $77,807 after hitting a six-week low of $76,197 on Friday, LSEG data show. (renae.dyer@wsj.com)
0630 ET - The cost of insuring French sovereign debt against default stays fairly high as fiscal concerns grow. Political uncertainty in France is causing fears about its public finances as borrowing costs climb. In addition, concerns about sluggish economic activity are weighing on investor sentiment. France 5-year sovereign credit default swaps trade at 97 basis points, significantly higher than the 77bps a month ago, and 29bps at the start of this year, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0556 ET - The Bank of England could indicate that it is approaching the terminal rate during Thursday's policy meeting, Tickmill Group's Patrick Munnelly says in a note. The terminal rate is the peak interest rate during a central bank's rate-rise cycle. The BOE is widely expected to increase interest rates by a quarter point to 4.0% this week. Nonetheless, the BOE could resist current market expectations of three more rate hikes by July 2027. U.K. jobs data shows signs of cooling, Munnelly says. Markets price in 105 basis points of BOE rate increases by the end of 2027, slightly lower than 119bps priced in last week, LSEG data show. (miriam.mukuru@wsj.com)
0552 ET - Yields on U.K. government bonds, or gilt, fall to multiweek lows as declining oil prices cause inflation fears to subside. Ongoing Iran peace talks are enabling oil prices to retreat, contributing to improved market sentiment. "The [energy prices] pullback moderates the immediate geopolitical risk premium," Tickmill Group's Patrick Munnelly says in a note. Investors have also slightly scaled back their expectations for Bank of England interest-rate rises to 106bps by the end of 2027, down from 119bps last week, LSEG data show. Ten-year gilt yields fall to 5.219%, a nearly six-week low, while 30-year gilt yields drop to their lowest in more than 12 weeks at 5.646%, LSEG data show. (miriam.mukuru@wsj.com)
0531 ET - Manufacturing PMIs for October confirmed a solid performance for eurozone manufacturing, Leo Barincou at Oxford Economics says in a note. The PMI stood at 52.7 in October, largely unchanged from September. Resilience is being driven by fiscal stimulus, defense spending and the AI boom, which should continue to support activity in 2027, Barincou says. Most of this strength is concentrated in Germany, while Spain is also a bright spot, though manufacturing remains in contraction in France and Italy, he says. "Today's figures support our view that manufacturing remains an important source of resilience for the eurozone economy...However, strong demand combined with constrained supply is also keeping price pressures elevated," Barincou says, noting that input prices rose at their fastest pace since May. (don.forbes@wsj.com)
0458 ET - The Norwegian krone falls along with oil prices on optimism over diplomatic efforts to end the U.S.-Iran conflict. President Trump said at the weekend that negotiations with Iran to end the war were "going fine" while U.S. Secretary of State, Marco Rubio, said the U.S. was open to a diplomatic solution. Brent crude drops more than 4% to $108.61 per barrel. The krone has a strong positive correlation to oil prices as Norway is a major oil and gas producer. The euro rises more than 1% to 10.3660 krone, LSEG data show. (renae.dyer@wsj.com)
0444 ET - Indonesia's external trade position is expected to stabilize in 2H and remain in surplus through 2027, RHB economist Wong Xian Yong says in a note. However, the cumulative surplus is likely to remain modest as imports continue to grow faster than exports, he reckons. Export growth should receive support from manufacturing and selected commodities, he says. However, weaker Chinese demand for coal and industrial metals could weigh on shipments, he adds. Rising demand for imported industrial inputs and energy will keep import growth firm, limiting the scope for a larger surplus. The outlook will depend on global commodity demand, China's economic recovery and rising domestic industrial and energy import requirements, RHB says.
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