Treasury Yields Rise Amid Geopolitical Uncertainty — Market Talk

0905 ET - Treasury yields rise as markets face geopolitical uncertainty and brace for interest rate increases amid a lull in economic indicators. China's Xi Jinping visits the U.S. Brent crude rises 1%, back to $100 a barrel, following President Trump's threat to escalate the war in Iran if Tehran fails to accept a deal. Hawkish Fedspeak supports bets on a sequence of hikes into 2027. The 10-year yield rises to 4.988% from yesterday's settlement of 4.966% and the two-year increases to 4.796% from 4.749%. ([email protected]; @ptrevisani)0901 ET - Bitcoin prices are lower after a recent surge bringing prices to $87,000, the highest they've been since January. The crypto token is trading down 0.8% to $85,506, according to data from LSEG. Even so, the mood among investors regarding bitcoin is positive, with traders seeing the timing of bitcoin's jump as a positive sign for demand--which appears to be coming largely from ETFs, says Naeem Aslam of Zaye Capital Markets in a note. "Bitcoin's ability to hold… despite a recent 25-basis-point rate increase and stalled crypto legislation shows that institutional demand is currently offsetting some macro and regulatory headwinds," says Aslam. Ethereum is down 1% to $2,723, XRP slips 0.1% to $1.57, and solana is off 0.8% to $116.98. ([email protected])0854 ET - Sterling falls to a 12-week low against the dollar as the Bank of England's cautious stance on raising interest rates diverges from the Federal Reserve tightening policy. Markets are betting on further U.S. rate rises after the Fed lifted rates by 25 basis points last week and pointed to at least one more hike this year, supporting the dollar. In contrast, the BOE left rates unchanged last week and avoided strong signals about the prospect of future rate increases. Meanwhile, the latest U.K. purchasing managers' survey came in weaker than expected. Sterling falls 0.6% to as low as $1.3260, LSEG data show. ([email protected])0804 ET - European banks are likely to keep up their strong performance over the next year, S&P Global Ratings analysts say at a media briefing event in London. Banks' profitability is expected to increase in 2027, as higher central-bank rates boost interest revenue, the analysts say. Additionally, operating costs are expected to remain modest as banks continue to adopt efficient technology, they say.([email protected])0800 ET - The dollar has scope to rise further, particularly against sterling, after the Federal Reserve raised interest rates and signalled further tightening last week, HSBC's Daragh Maher says in a note. "With Fed credibility on an upswing, we believe the FX market will increasingly look to other currency vulnerabilities beyond the U.S." HSBC expects further dollar gains against sterling, which looks exposed to U.K fiscal risks ahead of October's budget and the potential for the Bank of England to disappoint market bets for rate rises, he says. Another challenge is weak U.K. labor demand ahead of another possible real income squeeze if energy prices remain elevated, he says. Sterling falls to an eight-week low of $1.3271, according to LSEG.([email protected])0742 ET - The latest strong eurozone PMI surveys support the case for interest-rises from the European Central Bank in December and February, given the rebound in global energy prices and remarkable resilience in domestic demand, HSBC's Chris Hare says. Previously, HSBC penciled a hike in December only. The change is based on the likelihood that the energy situation might not improve much or could even intensify over the winter, he says in a note. However, the lack of second-round effects from the energy shock means the ECB can reverse upcoming rate hikes in 2028. "We expect cuts in March and June that year--taking the deposit rate to 2.5%, which we think is broadly neutral," Hare says. ([email protected])0740 ET - Norges Bank's rate decision on Thursday could go either way, as there are arguments to hold and to hike, DNB Carnegie senior economist Oddmund Berg writes. DNB Carnegie expects the central bank to stand pat at 4.25%, while noting that the risk of a hike remains substantial. "This remains a marginal decision, with the underlying factors pointing in different directions." On the one hand, the committee has become more concerned about persistent above-target inflation, while energy prices have risen and foreign rate expectations have moved higher. On the other hand, the committee has repeatedly stressed that it will not tighten policy more than necessary. With data since June pointing towards weaker demand, lower inflation and a stronger Norwegian krone, the cost of waiting is low, he says. ([email protected])0738 ET - The striking resilience of the eurozone's PMI data shows that once the energy-price shock fades, the region could be heading for above trend-growth in late 2027 and 2028, Berenberg's Andrew Wishart says in a note. "The risk to our long-held call for a mini-boom in 2028 is that it may start over the course of 2027 already," he says. The eurozone composite PMI climbed to 53.1 in September from 52.0 in August, a 41-month high. The encouraging pickup in new orders, as well as backlogs of work and employment in response to German fiscal stimulus, rising government military expenditure, and signs of more private sector investment in AI support a broadly positive outlook, he says. ([email protected])0737 ET - The Hungarian central bank's decision Tuesday to pause interest rate cuts and lower its inflation target is positive for the forint, ING's Frantisek Taborsky says in a note. However, the global backdrop remains largely negative despite the recent improvement in risk sentiment, he says. The dollar is stronger, the forint remains highly sensitive to energy prices and the prospect of further Federal Reserve interest rate hikes could trigger renewed pressure on emerging market currencies, he says. "The overall picture is thus very mixed, and global factors could easily take the driver's seat."ING still sees scope for the euro to fall below 360 forints but this depends on global factors, he says. The euro rises 1.1% to 364.08 forints. ([email protected])0622 ET - China's AI development is moving from policy ambition to commercial reality, BofA Securities says in a research note. "Domestic capabilities and adoption are advancing despite gaps in leading-edge hardware, while improvements in model efficiency and system optimization could support commercial viability before full technological self-sufficiency," the bank says. Tech progress and high-profile listings could expand China's "investable AI universe," it adds. This offers diverse business opportunities across the domestic AI industry and global supply chains, BofA says. ([email protected])0620 ET - The Norges Bank rate decision on Thursday is close to a 50/50 call, although Nordea leans towards a hike to 4.50%. On the one hand, core inflation has surprised on the downside in recent months, chief economist Kjetil Olsen writes. Combined with signs of somewhat weaker capacity utilization, this argues for waiting until more information is available on both inflation and activity before tightening further, he says. On the other hand, inflation is still too high. Energy prices have risen sharply since June and market expectations for policy rates across Norway's trading partners have shifted materially higher. "There are therefore credible arguments on both sides, and we expect these to feature prominently in the monetary policy committee's deliberations." ([email protected])0619 ET - U.K. PMI data shows price pressures strengthened in September, which will worry Bank of England policymakers and boost the case for interest-rate hikes, RSM U.K.'s Thomas Pugh says in a note. The input and output prices balances both rose to three-month highs, the PMI data show. The outlook looks even more challenging, as rising energy prices risk pushing inflation above 4% early next year, he says. That will squeeze households' real incomes and potentially force the BOE to hike rates later this year, Pugh notes. Tax rises at the government budget announcement next month could weigh on growth too. "The next six months are likely to feel like a return to stagflation as inflation rises and growth slows," he says. ([email protected])