Inflation Worries Return, Pushing Up CPI Swap Rates; Jobless Data Eyed

Inflation Worries Return, Pushing Up CPI Swap Rates; Jobless Data Eyed By Hardika Singh

Growing concerns about a return of price pressures sent rates on swaps used to manage inflation risk to the highest levels in more than two months on Wednesday, MarketWatch reports.

One- through 30-year rates on CPI swaps, or contracts linked to the Consumer Price Index, inched further above 2% to their highest levels since either mid- or late July, based on Tradeweb data as of 3 p.m. ET.

Meanwhile, five- and 10-year breakeven inflation rates also crept higher this week and headed in the same general direction they have been in since the Federal Reserve delivered an aggressive rate cut on Sept. 18, based on the most recent data from the St. Louis Fed.

Two weeks ago, the Fed's 50-basis-point rate cut triggered worries that inflation might not be so easily defeated. Now, traders are grappling with a multitude of potentially inflationary forces: a dockworkers' strike at U.S. East Coast and Gulf Coast ports, rising oil prices amid a possibly widening Middle East conflict, and stimulative measures by China's government and central banks in the U.S. and Europe that are cutting interest rates.

Meantime, upbeat data has helped ease worries about the U.S. labor market ahead of Friday's monthly jobs report. On Wednesday, ADP data showed private-sector hiring picked up in September for the first time in six months. Thursday will bring weekly jobless claims and data on the services sector.

Top News Fed's Barkin Sees More Work to Do on Inflation

Progress on slowing price growth-after two years of 20-year high interest rates and easing supply-chain snags-justifies Federal Reserve rate decreases, but the inflation beast isn't slain yet, according to Thomas Barkin, reports Nicholas Jasinski for Barron's.

The central bank's September jumbo rate cut was about adjusting to today's economic backdrop-not a signal of panic about a faltering economy, the Federal Reserve Bank of Richmond President said Wednesday.

"This dial-back in restraint just takes a little bit of the edge off," Barkin said in prepared remarks at the 2024 University of North Carolina Wilmington Economic Outlook Conference in Wilmington, N.C. on Wednesday.

BOJ Board Member Urges Caution on Rate Hikes

Bank of Japan board member Asahi Noguchi sees a need for the central bank to maintain an accommodative monetary policy stance given Japan's long history of deflation, he said Thursday, echoing remarks from the country's new prime minister.

U.S. Economy The Hurricane That Threatens to Sink Asheville's Feel-Good Success

Hurricane Helene has thrown off Asheville's status as one of America's most desirable mountain meccas. Floodwaters and heavy wind from the hurricane destroyed the arts district, decimated historic Biltmore Village and trapped some people in their own homes. After nearly a week, there is still no running water, scant power and spotty cell service.

Hurricane Helene Scrambles Campaign Calculus for Harris and Trump You Have Homeowners Insurance. Is It Enough to Rebuild Your House? ADP Jobs Report Shows 143,000 Gain

U.S. businesses added a higher-than-expected 143,000 new jobs in September, paycheck company ADP said. Yet it was the sixth straight month in which employment gains totaled less than 200,000 in a sign the labor market has cooled off considerably. (MarketWatch)

Striking Dockworkers Are Top Earners-When They Work

Tens of thousands of dockworkers from Maine to Texas went on strike Tuesday in the first coastwide walkout by the International Longshoremen's Association in almost 50 years. Many of them earn six-figure salaries .

Financial Regulation SEC Enforcement Director Who Pushed for Big Fines Steps Down

Gurbir Grewal, who oversaw a stepped-up period of enforcement against Wall Street and the fast-growing cryptocurrency industry, is departing the U.S. Securities and Exchange Commission, the agency said Wednesday.

SEC Appeals XRP Decision That Left Some Crypto Trades Unregulated

Wall Street's top cop is appealing a federal court's decision in the only cryptocurrency enforcement action in which it suffered an adverse ruling. The Securities and Exchange Commission's move tees up an opportunity for a marquee appeals court to decide how far the agency's rules reach into the crypto market.

Wall Street Races to Bring Private Credit to the Masses

Money managers are racing to bring the Wall Street craze known as private credit to ordinary investors. Investment giants including Apollo Global Management , BlackRock, Capital Group, KKR and State Street are jostling to launch private-credit exchange-traded funds and other retail products. The funds would allow anyone to buy into the $1.7 trillion market for loans made by Wall Street's nonbanks to corporations and consumers.

U.K. Regulator Fines a Digital Bank for Financial-Crime Failings

Upstart online banks are under scrutiny again, this time after the U.K.'s financial regulator found "shockingly lax" customer checks at a British financial-technology outfit. The Financial Conduct Authority fined decade-old Starling Bank about GBP29 million, or $39 million , for failing to tackle financial crime while it rapidly grew its customer base.

Forward Guidance Thursday (all times ET)

8:30 a.m.: Initial jobless claims

9:45 a.m.: S&P final U.S. services PMI

10 a.m.: ISM services

10 a.m.: Factory orders

10:40 a.m.: Minneapolis Fed President Neel Kashkari moderates discussion with Atlanta Fed President Raphael Bostic

Friday

8:30 a.m.: Jobs report

Research Sterling Falls After BOE's Bailey Hints at More Aggressive Rate Cuts

Sterling fell to a two-week low against the dollar and a 10-day low versus the euro after Bank of England Governor Andrew Bailey signalled the prospect of more aggressive interest-rate cuts if inflation continues to ease. Bailey's remarks in a Guardian interview published Thursday undermine sterling's yield differential with the U.S. and Europe, XTB analyst Kathleen Brooks says in a note. "The market has used Bailey's comments as a green light to price in more monetary loosening." Sterling is also hit by risk aversion amid Middle East tensions and may struggle to recover unless these ease and if U.K. inflation data exceed expectations, Brooks says. - Renae Dyer

Basis Points Inventories of crude oil in the U.S. rose for the week ended Sept. 27 , counter to analyst forecasts of those stocks dropping. Charities, distant relatives and even pets are benefiting from surprise inheritances . They can thank people without children. TD Securities revises its Canada rate outlook, and now expects six consecutive quarter-point cuts until the Bank of Canada policy rate hits 2.75% by next June. (Dow Jones Newswires) The number of U.K home sales soared on year in September as average mortgage rates fell to their lowest point in 15 months, a report from real-estate agency Zoopla said. Eurozone government bond yields edged higher, pressured by incoming supply with a number of bond auctions from France and Spain on Thursday, as well as by higher oil prices. (Dow Jones Newswires) Turkish consumer prices lost more pace last month, falling to 49% from 52% in August, a boon to the central bank as it looks for signs that its tighter policy is bearing fruit. (DJN) About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Hardika Singh in New York. Send your tips, suggestions and feedback to [hardika.singh@wsj.com].

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

October 03, 2024 07:15 ET (11:15 GMT)

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