French central bank chief Emmanuel Moulin has dismissed calls for European Central Bank intervention to address a French bond sell-off, saying that current conditions do not warrant such action. Moulin's comments come amid rising borrowing costs and public finance concerns, which have become central issues in the upcoming presidential election. Left-wing candidate Jean-Luc Mélenchon has accused Moulin of political interference, while far-right candidate Marine Le Pen has called for ECB intervention once France's finances improve.

A wave of AI-related corporate borrowing is increasing competition for capital with governments, as Broadcom lines up $50 billion of financing and SpaceX seeks $30 billion of investment-grade debt plus $10 billion in bank loans. The surge comes as sovereigns face heavy funding needs and rising yields, with the 10-year Treasury near 5.31% and the 30-year around 5.70%.

France has become the main pressure point in Europe's bond sell-off, with its 10-year yield up 70 basis points in September and its spread over Germany nearing 160 basis points as deficit and election risks drive selling. Italy's spread widened to 130 basis points, while Germany, the Netherlands and Switzerland drew safe-haven demand and Spain and the UK proved more resilient.

Amid a sovereign debt selloff, 38% of France's high-grade corporate bonds are now considered safer than government bonds, a dramatic rise since the start of the year. This inversion reflects eroding confidence in France's government debt, driven by missed deficit targets and political uncertainty. Companies with international exposure are attracting strong investor demand, emphasizing the appeal of their financial stability and yields.

Foreign investors withdrew $26.3 billion from emerging markets in September, the first outflow since June, as the US Federal Reserve's rate hike drove up US Treasury yields and the dollar, according to the Institute of International Finance. The fixed-income sector saw $7 billion in outflows, while equities faced a $19.2 billion outflow, primarily from South Korea.

The US Federal Reserve's decision to raise interest rates in September was unanimously backed by all 19 officials, according to minutes from the Federal Open Market Committee meeting. The move aimed to counteract rising inflation, with many officials noting increased economic momentum. However, recent comments by Fed Vice Chair Philip Jefferson and New York Fed President John Williams suggest the central bank may pause further hikes to assess the economy, leading investors to lower their expectations for another rate increase this month.

Chinese government bond prices have risen this year, pushing the yield on the country's 10-year bond down to 1.7%, a sharp contrast to rising yields in other major economies. The People's Bank of China has become a net buyer of government bonds, suggesting it views lower borrowing costs as beneficial for the country's sluggish economy.

The Reserve Bank of India raised its benchmark repo rate by 25 basis points to 5.5% for the first time since 2023 amid high energy prices and inflation concerns stemming from the conflict in the Middle East. The RBI also raised its real gross domestic product growth projection for the fiscal year ending March to 7.1% from 6.7%, and its inflation forecast to 5.2% from 5%.

The European Securities and Markets Authority has clarified that EU market participants will still be able to access third-country central securities depositories after the current transitional regime expires in January, allaying concerns of potential operational disruption. ESMA says the transitional regime will remain until the EU finalizes legislation to extend it and that the European Council and Parliament support an extension.

Critics are challenging the necessity of bank resolution plans, with figures like US Comptroller of the Currency Jonathan Gould advocating for reduced requirements. Despite criticisms, these plans have proven useful during previous cases, where they helped manage bank failures without state-funded bailouts. While not flawless, resolution plans provide valuable frameworks for managing bank failures and preventing financial contagion

This paper examines the transition to mandatory central clearing of US Treasuries, covering the policy objectives underlying the reforms and the evolving market structure, including trends in clearing adoption and client participation. Click here to read the paper.