The Price of Money After the Rally

The Dow gained 1,104 points Monday and Japan’s Nikkei rose 2.87% Tuesday, while an October survey found that more U.S. small businesses paid a higher rate on their latest loan. For a treasurer financing holiday inventory, today’s inflation report, household credit figures and $42 billion Treasury auction will help put selling prices, customer payments and borrowing costs into perspective.

 

 

 

Ionfi Morning Treasury Pulse™

 

 

The first clue this morning came from business owners. In the October survey from the National Federation of Independent Business, a net 37% of owners planned to raise selling prices, the highest reading since July 2022. A net 13% reported paying a higher rate on their most recent loan. A retailer can raise its December prices and still earn less on the inventory it borrowed to buy. At 8:30 a.m. ET, economists expect October’s core consumer price index to show a 0.2% monthly increase. In London this morning, Fed Governor Christopher Waller said he would favor a quarter-point December rate increase even if inflation cooled as expected. A core reading around 0.3% or higher would lead him to consider half a point. The monthly figure carries particular weight because last October’s federal shutdown left a gap in price collection and ruled out the usual year-over-year comparison. 

 

Borrowers in Europe heard a similar message. European Central Bank chief economist Philip Lane said a December rate increase would be prudent if the outlook holds. European shares nevertheless followed Japan higher, while the U.S. premarket was more selective. Dow futures gained 173 points and Nasdaq-100 futures slipped 0.32%. Earnings gave investors a reason to distinguish among companies. Electronics manufacturer Sanmina gained 15.9% by 7:30 a.m. ET after a strong quarter and outlook, while Hims & Hers traded lower on its fourth-quarter guidance. For a CFO comparing longer-term financing proposals, the U.S. 10-year Treasury traded at 97.95 to yield 4.89% ahead of this afternoon’s auction. 

 

In Mexico, the national export figure only tells part of a supplier’s story. October inflation accelerated to 3.75% from a year earlier, while manufacturers exported 258,137 light vehicles, down 17.9% over the same period. GM’s vehicle exports from Mexico fell 47.2%. If I were reviewing a parts supplier’s credit line, I’d want to know which assembly plants account for its receivables before revising its cash forecast. In Brazil, central-bank minutes released this morning explained why policymakers held the Selic at 13.75% despite slowing growth. They cited the weaker real, energy costs, El Niño and changes to the workweek. Brazil’s 10-year government yield rose 13 basis points to 15.12%. For a company refinancing in reais, that sovereign benchmark is the starting point. The lender’s spread and fees determine what the company will actually pay. 

 

 

Ionfi Market Snapshot & Signal Grid™

 

 

Today’s Market Theme

 

The U.S. two-year Treasury yielded 4.61% before CPI, nine basis points above Monday’s premarket reading. The 30-year yield rose just one basis point over the same interval. Most of the change in benchmark borrowing costs came at the shorter end. 

 

Market observations were taken at different times through approximately 8:00 a.m. ET. Equity futures changes are measured against prior settlement. Digital-asset changes cover 24 hours. 

 

U.S. Equity Futures

The VIX stood at 20.03 at 7:51 a.m. ET, up 0.11 from Monday’s close of 19.92. The sharp drop from Friday’s 25.64 occurred during Monday’s rally. 

 

Global Equities

 

U.S. Treasuries

The three-month bill yielded 4.18%, the six-month 4.34% and the one-year 4.42%. Extending from three months to one year added 24 basis points of annualized yield. 

 

Energy & Precious Metals

Brent briefly fell below $90 for the first time since August after President Trump signaled he would hold off on further strikes against Iran. Gold also lost ground as the dollar firmed and short-dated Treasury yields rose. 

 

Major Currencies

 

Mexico & Latin America

 

Digital Assets

 

 

Ionfi | CIO — What to Watch Into the Close™

 

• 8:30 a.m. ET · Inflation and the two-year yield. Use 4.61% as the two-year Treasury’s pre-release reference. Where it trades after the equity open will show how much of the bond market’s initial reaction to CPI holds. 

• 11:00 a.m. ET · The customer behind the sale. In the New York Fed’s household credit report, look for the share of credit-card balances newly falling behind. That is the figure I’d bring to a discussion about how much holiday demand retailers can count on. 

• 1:00 p.m. ET · Demand for ten-year money. Compare the yield on Treasury’s new $42 billion note with its when-issued yield just before bidding closes. If buyers demand a higher yield at auction, a CFO considering longer-term debt will want a fresh benchmark before comparing lender quotes. 

 

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