FED: "*DALY: AI CURRRENTLY CONTRIBUTING MODESTLY TO HEADLINE INFLATION

• US equity indexes hold modestly weaker levels Monday, the Nasdaq and SPX emini narrowly outperforming the DJIA in the second half: SPX emini -0.06%, Nasdaq -0.1%, DJIA -0.33%).
• Carry over concerns over continued performance of AI-related stocks weighed on the technology sector: Applied Materials Inc -8.20%, Take-Two Interactive Software -5.36%, Micron Technology Inc -5.17%, Lam Research Corp -4.67% and KLA Corp -4.56%.
• Meanwhile, the Health Care sector was weighed down by pharmaceutical companies: despite beating earnings expectations, Johnson & Johnson trades -6.25% in the second half after YoY GAAP net income fell 96%. Followed by Vertex Pharmaceuticals Inc down -4% after softer sales projections for its cystic fibrosis drug Trikafta.
• Energy sector shares led advances late Monday, buoyed by oil and gas stocks as crude prices remain elevated (WTI trading around $94/bbl): Valero Energy Corp +3.57%, Expand Energy Corp +3.14%, Phillips 66 +2.88%, Marathon Petroleum Corp +2.78% and Devon Energy Corp +2%.
• Telecom shares were close behind as analysts deemed the sector oversold: Charter Communications Inc +3.91%, Omnicom Group Inc +2.56% and Meta Platforms Inc +2.53%.
• Note, financials kicked off the latest earnings cycle this morning with the following: Goldman Sachs the only stock trading positively +0.23%, while Wells Fargo & Co trades -2.2%, JPMorgan Chase -0.04%, and Citigroup -4.0%.
  • Earnings on tap Wednesday: Blackrock Inc, Bank of America Corp, Morgan Stanley and State Street Corp.
  • Thursday: Charles Schwab Corp, US Bancorp, Bank of New York Mellon and PNC Financial Services.

European curves traded mixed Tuesday, with EGBs outperforming Gilts.

• Bonds found a bid in early European trade, weathering a pickup in gas prices. From then on, though, crude oil movements would dominate, with a pullback initially helping bond yields lower (aided by tech stock struggles).
• Continued headlines re Houthi/Saudi mutual threats including reported explosions in Yemen would see oil move higher from late morning onward, with European yields closing at/near session highs.
• The UK curve twist flattened, with notable underperformance at the short end. The German curve saw yields little changed through the 15-year tenor, though 30Ys saw a decent rally.
• OATs outperformed after lagging the pack Monday, with periphery/semi-core EGB spreads tightening overall.
• Wednesday's calendar highlight is the US CPI report release, with European data including UK monthly activity, Eurozone industrial production, and French final September inflation.
• There's also multiple speakers in attendance at the IMF/World Bank annual meetings in Thailand, including BOE's Bailey and Pill, and ECB's Lagarde.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 3.152%, 5-Yr is up 0.4bps at 3.269%, 10-Yr is down 0.8bps at 3.469%, and 30-Yr is down 2.6bps at 3.815%.
• UK: The 2-Yr yield is up 1.7bps at 4.928%, 5-Yr is up 1.1bps at 5.024%, 10-Yr is up 0.7bps at 5.447%, and 30-Yr is down 0.2bps at 5.924%.
• Italian BTP spread down 3.4bps at 106.2bps / French OAT down 4.2bps at 137.9bps

• Date $MM Issuer (Priced *, Launch #)
• 10/13 $2.3B #BNS $600M 3NC2 +62, $400M 3NC2 SOFR+72, $700M 4NC3 +72, $600M 6NC5 +85
• 10/13 $1.8B #Tencent $1.3B 10Y +90, $500M 20Y +115
• 10/13 $1.5B #TD Bank 3Y SOFR+46
• 10/13 $1B #KBC 6NC5 +95
• 10/13 $1B #NatWest 6NC5 6NC5 +90
• 10/13 $600M #Lennar $300M 3Y +80, $300M 5Y +95
• 10/13 $600M *KEB Hanna Bank $300M each: 3Y +42, 5Y +50
• 10/13 $Benchmark JP Morgan 4NC3 +70, 4NC3 SOFR, 11NC10 +90