The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1849 ET - The Reserve Bank of Australia is flirting with inducing a recession in the economy, which might be closer than some think. Independent economist Saul Eslake says conditions in the job market are already go close to his definition of a recession, which says that if the unemployment rate rises by 1.5 percentage points or more in the space of 18 months or less, the economy is in recession. He argues that the rule has proven to be correct since the 1960s. So if unemployment gets to around 5.3%, from 4.7% now, in the first half of next year, "which is quite plausible," that would come very close to recession-like conditions, he adds. (james.glynn@wsj.com; @JamesGlynnWSJ)The Reserve Bank of Australia will likely raise the official cash rate at the conclusion of its policy meeting at 0330 GMT, but will also be conscious of the fact that the economy will be closer to "snapping," says Jonathan Kearns, chief economist at Challenger. Still, the bank will maintain hawkish rhetoric in order to keep markets priced for further tightening. It can't afford yet to see traders start pricing cuts, says Kearns, a former senior manager at the RBA. (james.glynn@wsj.com; @JamesGlynnWSJ)
1727 ET - With a fifth interest rate rise by the Reserve Bank of Australia at 0330 GMT fully priced, attention in markets will be on the bank's forecasts and its guidance. It's likely that the bank will keep the door open to further action given that inflation has recently moved away from its target and that its forecasts will be revised higher. The great fear of policy makers is that high inflation expectations are becoming entrenched. The expected rise in the official cash rate will be delivered despite the fact that house prices are falling at their fastest pace in close to half a century. (james.glynn@wsj.com; @JamesGlynnWSJ)
1559 ET - Treasury yields are mixed as Americans head to midterm elections and the government starts to lay out its borrowing plans. The Treasury says it projects to borrow a lower-than-expected $618 billion in the current quarter, while planning to sharply increase that goal to $800 billion in 1Q 2027. It will explain Wednesday how much of it will come from short-term and long-term debt. Investors are watching to gauge where supply will expand the most. The JOLTS report tomorrow kicks off this week's stream of labor data. The 10-year yield slips 0.035 percentage point to 4.893%, while the two-year edges up 0.002 point to 4.581%. (paulo.trevisani@wsj.com; @ptrevisani)
1545 ET - The U.S. Treasury expects to borrow $618 billion in privately held net marketable debt in the current quarter, $10 billion less than announced in August. The reduction is "primarily due to the higher-than-assumed beginning of quarter cash balance, partially offset by lower projected net cash flows," the department says in a statement. For the January-March 2027 quarter, the borrowing estimate is $800 billion, assuming an end-of-March cash balance of $1 trillion. The new borrowing estimate compares with $742 billion borrowed in the July-September quarter, which ended with a cash balance of $984 billion. The Treasury will detail its quarterly refunding plans on Wednesday. (paulo.trevisani@wsj.com; @ptrevisani)
1520 ET - New leveraged financing, or loans made to businesses with credit ratings below investment grade, totaled about $190 billion across North America during this year's third quarter, down nearly 14% from the previous quarter, according to Fitch Ratings. A total of $81.5 billion in high-yield bonds were issued during the latest quarter, down 21%, while refinancings also declined to $32 billion, the credit-ratings firm says. However, loans to finance mergers and acquisitions, including leveraged buyouts, rose about 12% to a total of $37 billion. "Credit quality indicators were mixed" during the third quarter, Fitch says. "Downgrades exceeded upgrades by 15 in Fitch's North American leveraged finance portfolio, reversing net positive migration in 2Q." Fitch adds that borrowers with low credit ratings continue to have "limited financial flexibility, with elevated leverage and low interest coverage." (luis.garcia@wsj.com; @lhvgarcia)
1410 ET - A Democratic sweep in the midterm elections could curb the selloff in U.S. Treasuries but probably wouldn't fully reverse the rise in yields, Ebury market analyst Diego Barnuevo says in a note. The Iran war has added an inflationary risk premium across the yield curve. Meanwhile, inflation expectations remain elevated and corporate bond issuance to fund AI investment is adding to supply. A Democratic sweep would be neutral to mildly positive for the fiscal outlook, Barnuevo adds. "Congress could restrain Trump's expansionary agenda and, with it, the deficit." (jessica.coacci@wsj.com)
1146 ET - The $6.3 billion Binance hack will probably push crypto custodians and exchanges to implement new defenses, including the separation of everyday employee devices from critical financial systems, StoneX analyst Mark Palmer says in a research note. Those firms will also want to create approval policies that bar laptop or vendor logins from reaching the mandating of independent approvals before large transfers, he says. The analyst also expects to see dynamic hourly caps on what any one wallet or service can move. It seems Binance didn't have had any of those measures in place in a form that could have prevented the intrusion, Palmer says. (dean.seal@wsj.com)
1113 ET - Kuwait accounts for the Gulf's major sovereign bond issuances in October, raising about $3.7 billion through three transactions, according to Kamco Invest's monthly fixed-income report. The country issues $2.25 billion in three-year international bonds carrying a 5.62% coupon and $1 billion in 10-year bonds with a 6.2% coupon, both dated October 26. A further $482 million government bond issue follows on October 28, carrying a 4.13% coupon. Total GCC government bond issuance rises to around $3.7 billion during the month, from $3.3 billion in September, the report shows. (farhan.rafid@wsj.com)
1112 ET - Gulf credit spreads widen in October even as regional bonds recover some of their losses, according to Kamco Invest. The option-adjusted spread on GCC dollar-denominated credit rises 20 basis points during the month to 108 basis points, bringing the increase since the start of 2026 to 33 basis points. Emerging-market dollar bond spreads widen by 27 basis points to 197 basis points. Meanwhile, the GCC credit and high-yield dollar bond index gains 1.2% in October but remains down 2.2% for the year. The figures suggest that falling benchmark yields supported bond returns despite a higher premium for credit risk. (farhan.rafid@wsj.com)
1111 ET - The Swedish krona is likely to strengthen if the Riksbank raises interest rates on Wednesday, Societe Generale's Kit Juckes says in a note. "With consensus GDP growth forecasts for 2026 at 2.6%, Sweden has Europe's strongest economy at the moment, and the currency is only held back by the Riksbank," he says. That means a rate rise should lift the krona even though a move is highly anticipated, he says. The market prices a 85% chance of a 25 basis-point rate increase, LSEG data show. The euro falls 0.1% to 10.9302 krona after earlier reaching a near three-month low of 10.9210. (renae.dyer@wsj.com)
1107 ET - Conventional bonds across the Middle East and North Africa outperform Islamic debt in October, according to Kamco Invest's monthly fixed-income report. The MENA bond index gains 1.7% during the month, compared with a 1% increase for the region's sukuk index, while the combined benchmark advances 1.5%. Both markets remain in negative territory for 2026, with conventional bonds down 2.6% and sukuk declining 0.5% since the start of the year. Globally, investment-grade debt rises 1.4% in October, while high-yield bonds edge down 0.2%, reflecting differing performances across fixed-income segments.
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