Markets Overview

  • ASX SPI 200 futures up 0.1% to 6,964.00
  • Dow Average little changed at 33,121.72
  • Aussie up 0.8% to 0.6373 per US$
  • U.S. 10-year yield fell 2.3bps to 4.7102%
  • Australia 3-year bond yield fell 9.3 bps to 4.04%
  • Australia 10-year bond yield fell 9.4 bps to 4.57%
  • Gold spot little changed at $1,820.75
  • Brent futures down 1.9% to $84.16/bbl

Economic Events

RBA – Financial Stability Review 11:30 a.m.

Stocks and bonds have backed away from the worst of this week’s slump, though data Friday threatens to spur a fresh slide.

US equity benchmarks ended the day pointing lower Thursday after the latest data showed the labor market was still strong with weekly unemployment claims holding near historical lows. The S&P 500 has been hovering above a key support level that — should it fall below — technical analysts warn could drive a steeper drop. With the gauge already down roughly 8% from July highs, a too-healthy number from Friday’s monthly non-farm payrolls could push yields back up and stocks down.

If the report is too hot and the yield on the US 10-year bond moves close to 5%, “we could easily see the S&P 500 fall through the 200-day moving average and at that point we could see an acceleration of the declines in stocks,” the former Merrill Lynch trader wrote.

The yield on the US 10-year bond drifted down to 4.7% after touching a 16-year high around 4.88% this week. The 30-year, which recently hit the 5% level, advanced toward 4.9% in Thursday’s session. Wall Street has been keyed in on rising borrowing costs and saw 5% as a likely target for longer-term US government bonds, now some money managers are saying 6% is on the table.

With the US benchmark interest rate at a 22-year high Fed speakers reinforced the higher-for-longer message and said data would need to be watched ahead of the November meeting to determine the central bank’s next move. Richmond Fed President Thomas Barkin, who does not vote this year, said the market is seeing a return to a more normal rate seen in prior years. The head of the San Francisco Fed Mary Daly — also a non-voting member — said that the central bank could hold rates steady if jobs and pricing showed signs of slowing.

Thursday’s report showed a slight rise in the number of people filing for unemployment benefits compared with the previous week. Claims ticked up to 207,000 in the week ending Sept. 30, according to Labor Department data. Earlier this week, the unexpected rise in August job openings spurred the rout in Treasuries. The selloff paused after private payrolls data showed US companies added the fewest number of jobs since the start of 2021 last month.

Other News

The Bank for International Settlements (BIS) and central bank partners today launched Project Mandala, which explores the feasibility of encoding jurisdiction-specific policy and regulatory requirements into a common protocol for cross-border use cases such as foreign direct investment, borrowing and payments.

Disparate policy and regulatory frameworks between different jurisdictions are among the chief obstacles to smooth and efficient cross-border payments. They contribute to the regulatory compliance burden across the payment chain, increase the time for cross-border transactions and introduce uncertainties among stakeholders.

Project Mandala – a proof-of-concept run by BISIH Singapore Centre, RBA, BOK, BNM and MAS, with the collaboration of financial institutions – seeks to ease the policy and regulatory compliance burden by automating compliance procedures, providing real-time transaction monitoring and increasing transparency and visibility around country-specific policies.

In doing so, it aims to address key challenges identified during Project Dunbar, which developed an experimental multiple central bank digital currency (mCBDC) platform.

The envisioned compliance-by-design architecture could enable a more efficient cross-border transfer of any digital assets including CBDCs and tokenised deposits. It could also serve as the foundational compliance layer for legacy and nascent wholesale or retail payment systems.

The measures could include quantifiable and configurable foreign exchange rules, as well as anti-money laundering and countering the financing of terrorism (AML/CFT) measures.

Project Mandala aligns with the Financial Stability Board 2023 priority actions for achieving the G20 targets for enhancing cross-border payments in the area of promoting an efficient legal, regulatory and supervisory environment for cross-border payments while maintaining their safety, security and integrity.

‘We are pleased to collaborate with the BIS Innovation Hub and central bank partners on this important initiative. It will help us to understand how embedding policy and regulatory measures in a common protocol could be used to improve the speed, cost and transparency of cross-border transactions. Enhancing cross-border payments is a priority for Australia and the wider international community, and the Bank is committed to doing what it can to contribute to this effort,’ said Brad Jones, Assistant Governor (Financial System), Reserve Bank of Australia.