Around the same time, the financial health of European banks, led by Credit Suisse Group, dominated credit markets, following a rise in the cost of its credit default swaps that was exacerbated by a social media frenzy. Subsequently, two key US economic data releases, which showed a tight labour market with the unemployment rate still languishing at historic lows of 3.5% in September and coupled with a hot core inflation print for September, cemented prospects of a fourth consecutive 75-basis-point rate hike in November.
Risk-off sentiments continued to prevail in a month plagued by hawkish Fedspeak urging for monetary policy to be tightened into restrictive areas as well as persistent inflation, with 10-year US treasury yields consequently peaking at 4.24% as at Oct 24, a level not seen since 2008. Ten-year US treasury yields rose for a third consecutive month, by 22 basis points overall from last month, to reach 4.05% as at Oct 31.
Despite contagion fears from the UK gilts market spreading swiftly to the US treasury market in early October, several US Federal Reserve officials commented that the Fed will not be deterred by financial market turbulence.
