The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1021 ET - Higher interest rates are weighing on Gulf fixed-income markets without triggering a broader deterioration in investor appetite for regional credit, Kamco Invest says. GCC bond and sukuk, or Islamic bonds, issuance fell 17.5% on quarter to $42.5 billion in the third quarter, while the GCC Credit + High Yield Index lost 3.8%. However, GCC credit spreads ended the quarter at 88 basis points, roughly half the emerging-market average of 170 basis points. Kamco says the selloff reflects higher rates rather than concerns over Gulf credit quality, with sovereign deals from Kuwait, Saudi Arabia and Qatar attracting orders two to five times their issue sizes. (farhan.rafid@wsj.com)

0946 ET - The labor market remains too weak for an extended tightening cycle following Friday's less-than-expected September payroll gain of just 29,000, according to Pantheon Macroeconomics in a note. The economists see the Fed pausing at the October meeting, and think a December move is far from certain. "We expect the FOMC to become increasingly worried about the labor market over the next year. Whether that anxiety deters another hike in December is a close call. But we still expect the Committee to resume easing from mid-2027, as inflation subsides and the labor market disruption from AI becomes too big to ignore," they say. There should be insight on what policymakers were discussing when they raised rates last month when Fed minutes are released on Wednesday. (patrick.sheridan@wsj.com)

0933 ET - Sterling could underperform as the October 28 U.K. budget approaches, Morgan Stanley strategists say in a note. There remains ample capacity for investors to add sterling-negative risk premium ahead of the budget, they say. High U.K. interest rates make it difficult to express sterling-negative views against many currencies but investors could bet on sterling falling against the dollar "given an increasingly-consensus market view for a higher dollar and the capacity for sterling to cheapen further as more risk premium is added." Sterling falls 0.2% to $1.3212. (renae.dyer@wsj.com)

0901 ET - French government-bond yields turn lower as buying resumes given yields are so close to multiyear highs. However, French bonds will likely remain volatile as France's fiscal credibility faces pressure from missed deficit targets, political gridlock and rising interest costs, eToro strategist Lale Akoner says in a note. The bonds look cheap but this doesn't mean they are attractive, she says. Potential selling by Japanese institutions, who are major foreign holders of French government bonds, could "add to market volatility," she says. The key will be whether bond-market selling spreads beyond France to other European countries, she says. French 10-year yields fall 3.8 basis points to 4.818%, having hit 4.993% on Friday, their highest since 2002, Tradeweb data show. (renae.dyer@wsj.com)

0900 ET - Treasury yields are little changed from the high levels they ended at last week. The U.S.-Iran standoff keeps Brent crude above $100, while odds of a Fed hold this month rise to 81% from 78% Friday. No major data points are on tap today. The Treasury will auction three-year notes tomorrow, followed by a 10-year auction Wednesday and 30-year on Thursday. Fed minutes are due Wednesday. The 10-year yield is at 5.276% and the two-year at 4.821%. (paulo.trevisani@wsj.com; @ptrevisani)

0900 ET - The recent selloff in French government bonds due to fiscal worries makes U.K. assets look comparatively safe, supporting sterling versus the euro, Ebury's Enrique Diaz-Alvarez says in a note. "The pound also continues to be well supported by resilient domestic data, with last week's revised GDP figures showing that the U.K. economy grew at a faster pace than initially anticipated in the second quarter." The October U.K. budget is a key risk for sterling and U.K. government bonds but French developments dominate, he says. The euro falls 0.3% to 0.8469 pounds after earlier reaching an 11-week low of 0.8456, according to LSEG. (renae.dyer@wsj.com)

0848 ET - The cost of insuring high-yield euro credit against default rises to a six-month high amid concerns about France's fiscal situation and after Spain announced snap elections, adding a layer of uncertainty to the eurozone outlook. French bond yields and their spreads against German peers soared to multiyear highs last week after the French government presented a budget proposal. Markets calm a little on Monday but French and Spanish government-bond yields remain elevated. "Europe's political and fiscal backdrop is becoming a more prominent market concern," Tickmill's Patrick Munnelly says in a note. The iTraxx Europe Crossover index of euro high-yield credit default swaps rises 4 basis points to 305bps, S&P Global Market Intelligence data show. (jessica.fleetham@wsj.com)

0821 ET - Friday's weaker-than-expected U.S. nonfarm payrolls report, upcoming Federal Reserve meeting minutes and G-7 measures to release energy supplies could temper the dollar's rise but not reverse it sharply, HSBC's Paul Mackel says in a note. The data argue against the Fed raising rates this month but this was largely priced beforehand and the Fed's focus is more on inflation, he says. The Fed minutes Wednesday could explain why officials voted unanimously to raise rates in September while the G-7's decision to release 100 million barrels of crude and diesel over four months alleviates concern over a proposed U.S. diesel-export ban, he says. The DXY dollar index rises 0.3% to 102.225 after reaching a near 18-month high of 102.535 overnight. (renae.dyer@wsj.com)

0814 ET - Leverage is leaving bitcoin at an orderly pace which should leave the market on firmer ground, says ARP Digital's Yusuf Fakhro. Open interest in Bitcoin derivatives fell by roughly 49,000 BTC over the week-one of the largest drops in two years--but this wasn't accompanied by a price crash, he says. "This tells you that traders were calmly taking profits after a strong September, not being liquidated in a panic," he says. Fakhro says high Treasury yields are the only barrier to another breakout. Bitcoin is 0.3% higher at $86,113. (joseph.wilkins@wsj.com)

0803 ET - The euro's potential to extend its current losses should prove limited if German government bonds remain largely unaffected by the selloff in French bonds on fiscal concerns, Commerzbank's Thu Lan Nguyen says in a note. "One of the euro's key support factors is the safe-haven status of German government bonds," she says. As long as investors have access to a euro-denominated safe asset, worries that the French budget will struggle to get approved remain a problem for French bonds rather than for the euro itself, she says. The euro falls 0.4% to $1.1214 after reaching a 16-month low of $1.1160 earlier, LSEG data show. (renae.dyer@wsj.com)

0717 ET - Spain's snap election is expected to produce a rightward shift, though this is unlikely to materially change the country's economic outlook, Harry Chambers at Capital Economics says in a note. A potential PP-Vox coalition could bring a stricter approach to immigration--a key growth driver for Spain--though restrictions are likely to be limited, he says. Fiscal policy could also loosen. However, proposed tax cuts should be accompanied by spending cuts, keeping fiscal expansion contained. "As a result, we suspect that the bond markets will take the election in their stride," Chambers says, noting that Spanish bonds are expected to hold up relatively well to recent market turmoil. "We expect [Spain] to continue to outperform, keeping the public debt ratio on a downward trend." (don.forbes@wsj.com)

0647 ET - Spanish voters head to the polls for a snap election, and while voting intentions may shift they currently suggest a right-wing PP-Vox absolute majority, J.P.Morgan's Mariana Monteiro says in a note. Growth implications from that outcome would likely be modest overall, with upside and downside risks broadly offsetting each other, she says. A PP-Vox government could have greater emphasis on spending restraint, tax reductions, and potentially higher defense spending. But they also may present a tougher stance on immigration, contributing to slower-than-anticipated labor-force growth, Monteiro says. "Heightened political fragmentation and policy inertia over recent years may have weighed on private investment, although any aggregate effect was likely overshadowed by powerful growth drivers," she says, including immigration expansion and EU-funded investment.