Treasury Yields Rise on Hotter-Than-Expected Inflation — Market Talk

0856 ET - Treasury yields and the dollar rise as inflation surprises on the upside and Fed Governor Waller opens the door for a half-point hike in December. He says a higher-than-usual move would be appropriate depending on inflation. October CPI comes at 0.4%, cooling from September's 0.6% pace but higher than WSJ consensus of 0.3%. Core is 0.3%, higher than the estimate of 0.2%. There is no annual reading because of last year's government shutdown. The WSJ Dollar Index rises 0.33%, versus up 0.14% before the data. The 10-year is at 4.940%, up from 4.909% before the CPI numbers. The two-year rises to 4.685% from 4.639%. ([email protected]; @ptrevisani)0852 ET - Bitcoin falls to an 11-week low after higher-than-expected U.S. inflation data for October. Headline consumer prices increased 0.4% compared to a month prior, above the 0.3% rise expected by economists in a WSJ survey. The result followed a 0.6% rise in September. Core inflation was up 0.3% on month, in line with September's figure, compared to expectations for a 0.2% increase. Annual figures were not released due to last year's government shutdown. The data support the case for the Federal Reserve to raise interest rates further, hitting risky assets. Bitcoin falls 1.4% to as low as $73,588, LSEG data show. ([email protected])0852 ET - Yields on two-year U.K. government bonds climb after stronger-than-expected U.S. inflation data for October. Monthly headline inflation rose 0.4% in October, above the 0.3% forecast by economists in a WSJ survey. The strong data raise the possibility of the U.S. Federal Reserve raising rates at the December policy meeting, pushing up U.S. Treasury yields. Two-year gilt yields rise 2.5 basis to last trade at 4.777%, Tradeweb data show. ([email protected])0850 ET - The eurozone economy could record weak growth in the coming year due to political uncertainty, high interest rates, and stricter budgets, ABN Amro economists say in a note. The pace of growth is expected to be below-trend, lagging behind developed market peers, they say. European businesses rely heavily on banks, rather than capital markets for financing, meaning current higher interest rates could weigh on businesses, the economists say. ([email protected])0827 ET - The Norwegian krone falls to a three-and-a-half-week low against the euro on softer oil prices and Norway's lower-than-expected underlying inflation data for October, but these declines are unlikely to be sustained, Rabobank's Jane Foley says in a note. Oil prices fall on hopes for a resolution to the Iran war, which is negative for Norway as a major oil and gas producer. "Clearly, however, this could change," Foley says. Moreover, Norges Bank has signaled further interest-rate rises while diversification away from the euro due to French debt concerns supports the krone given Norway's strong fundamentals, she says. The euro rises 0.7% to 10.6220 krone, LSEG data show, and Rabobank expects it to reach 10.0000 within 12 months. ([email protected])0814 ET - Liquidity in Gulf states' Sharia-compliant fixed income, or sukuk, remains below pre-war levels as geopolitical volatility takes its toll, according to Fitch. The ratings agency expects sukuk liquidity of GCC members to remain sensitive to geopolitical tensions, heightened interest rates and capital reallocation from emerging markets to developed markets. Sukuk from Saudi Arabia, Qatar and Kuwait were the most liquid of the group, with an average score of about 57/100. Sukuk issued by U.A.E. real estate developers had the lowest liquidity in Fitch's coverage, while asset-backed sukuk was found to be the most liquid sector. ([email protected])0746 ET - Announcements made at the U.K. budget in October have contributed to a better performance in U.K. government bonds, or gilts, relative to their U.S. and eurozone equivalents, Deutsche Bank Research strategists say in a note. U.K. Treasury chief John Healey announced a fiscal headroom of 15 billion pounds ($20 billion) and modest gilt issuance for the fiscal year 2026-27. Ten-year gilt yields have dropped about 25 basis points since the budget, more than their U.S. and eurozone peers. Recent stock market volatility and lower oil prices have also caused gilt yields to fall, the strategists say. Ten-year gilt yields fall 2.2 basis points to last trade at 5.112%, Tradeweb data show. ([email protected])0655 ET - Highly rated bonds have attractive yields, making them more favorable than other fixed income assets, UBS Global Wealth Management's Mark Haefele says in a note. The bonds also offer diversification benefits, Haefele says. UBS favors short-dated and medium-dated high-quality bonds. ([email protected])0646 ET - The cost of insuring U.S. dollar credit against default is unchanged ahead of U.S. inflation data due to be released at 1330 GMT. The data could show the impact of high energy costs and offer clues on the possible pace of future interest-rate rises by the U.S. Federal Reserve. "A stronger reading could force investors to reassess the possibility of additional tightening in 2027," Capital.com's Daniela Hathorn says in a note. The CDX North American Investment Grade index of dollar IG credit default swaps is unchanged at 59 basis points, S&P Global Market Intelligence data show. ([email protected])0639 ET - France, Italy and Spain face distinct challenges despite often being grouped together as similarly vulnerable eurozone economies, Paolo Grignani at Oxford Economics says in a note. France is most exposed, with weak growth prospects and a government reluctant to make unpopular cuts facing mounting market pressure. Meanwhile, Italy's main vulnerability is political, Grignani adds. "The Meloni government has been more stable and less fiscally unorthodox than expected, but a larger role for populist parties will test the recent calmness." Spain is in the strongest position, with the fastest growth and lowest debt ratio. Still, upcoming elections could test its economic durability, Grignani says. "Tighter immigration policies could bring forward a transition to lower growth and erode Spain's growth advantage." ([email protected])0612 ET - Sterling falls as lower oil prices reduce the prospect of the Bank of England raising interest rates further. Brent crude drops 1.9% to $90.79 a barrel after President Trump said further U.S. strikes on Iran were unlikely. The dollar meanwhile strengthens after Federal Reserve governor Christopher Waller said he would back another rate-rise in December. Attention now turns to U.S. inflation data at 1330 GMT. A firm print would weigh further on sterling-dollar, Monex Europe analysts say in a note. Sterling falls 0.1% to $1.3429. The euro rises 0.1% to 0.8356 pounds after earlier hitting a one-week high of 0.8363, LSEG data show. ([email protected])0541 ET - The cryptocurrency industry needs rules that survive elections and must reduce its reliance on one political party, according to Utkarsh Ahuja, founder of crypto hedge fund Moon Pursuit Capital. A potential Democrat investigation into President Trump's crypto interests and an inability to pass the Clarity Act highlight the limits of relying on one political coalition, he says. "For institutional investors, durable regulation can be more valuable than favourable treatment that changes with the next administration," Ahuja adds. Bitcoin is 1% lower at $74,162. ([email protected])