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

0654 GMT - The recent steepening of the U.S. Treasury yield curve may be a cause for concern, but Capital Economics keeps its view that long-dated yields will fall. Bond markets saw a second straight week of curve steepening last week, which may reflect a rise in the term premium amid concerns over fiscal deficits, geopolitical risks and weaker institutional demand. That said, the resilience of the U.S. dollar and relatively contained market-implied inflation expectations suggest investors are not yet overly concerned about U.S. fiscal risks. Capital Economics maintains its view that long-dated Treasury yields will eventually fall, assuming the Fed proves less hawkish than currently priced and term premium doesn't rise substantially further. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

0649 GMT - The dollar rises, hovering close to a near 18-month peak reached overnight against a basket of currencies and supported by expectations for U.S. interest-rate rises and French fiscal concerns. The dollar pulled back Friday after U.S. nonfarm payrolls data were weaker than expected but the falls proved short-lived. The report reduced expectations for an October interest-rate rise by the Federal Reserve but markets continue to price a high probability of a December increase, LSEG data show. Mounting worries over French debt are also weighing on the euro and supporting the dollar as a safe haven. The DXY dollar index rises 0.5% to 102.423, having earlier reached 102.535, its highest level since April 2025. (renae.dyer@wsj.com)

0613 GMT - The dollar could extend gains against the euro if the recent widening in the French-German OAT-Bund spread persists, OCBC strategists say. "Wider peripheral spreads tend to tighten eurozone financial conditions and weigh on [euro] sentiment," OCBC's Sim Moh Siong and Christopher Wong say. Still, betting on a disorderly selloff in European bonds remains risky given the ECB's extensive antifragmentation toolkit. The bar for activation remains high, though OCBC reckons the ECB is unlikely to remain passive if market fragmentation intensifies. Near term, they view verbal intervention as the first line of defense should spreads widen further. OCBC's base case is for a moderate rather than aggressive dollar rally into year-end, as markets have pared expectations for an October Fed increase after several officials signaled no urgency to tighten. (fabiana.negrinochoa@wsj.com)

0559 GMT - Rising U.S. rate volatility and European bond-market stress is becoming a bigger FX story than the greenback's advance, OCBC strategists say. That's weighing on the euro, and creating a headwind for EM carry trades and risk-sensitive currencies like the Aussie, making investors less willing to hold high-beta, carry positions. Euro-area fragmentation concerns intensify the stress, OCBC's Sim Moh Siong and Christopher Wong say. Pressure on European bank equities and the Swiss franc's outperformance suggest concerns are no longer confined to French bonds. Fragmentation fears fuel the risk that the ECB becomes more cautious on tightening as financial stability concerns compete with inflation. Continued rate volatility will maintain pressure on carry trades, cyclical currencies and the euro. Havens such as the franc and greenback should stay supported. (fabiana.negrinochoa@wsj.com)

0557 GMT - Allianz Global Investors sees opportunities across fixed income, as yield curves are expected to steepen in the U.S., Germany and Australia. U.S. Treasury Inflation-Protected Securities are seen benefiting from persistent energy-driven inflation pressures, says Jenny Zeng, CIO Fixed Income, in a note. Within government bonds, Zeng favors German Bunds at the short end and U.K. Gilts at the long end. In emerging markets, AllianzGI prefers debt issued by oil-exporting countries and selected Brazilian and Hungarian local bonds. AllianzGI expects major central banks to maintain a restrictive stance. It anticipates another 25bp increase from the Fed and the ECB before year-end, while the Bank of Japan is expected to continue its gradual normalization process. (monica.gupta@wsj.com)

0529 GMT - Inflation in Taiwan is likely to have stayed elevated in September amid higher energy prices and strong domestic demand. The island's consumer prices likely rose 2.4% from a year earlier, according to a poll of six economists polled by The Wall Street Journal. While the rebound in oil prices have lifted transport costs, the earlier arrival of the Mid-Autumn Festival this year may have boosted food and services prices, DBS economists say. After the Taiwan central bank stood pat for another quarter in September despite rising inflation, markets will closely watch the next inflation reports ahead of the December decision meeting. DBS expects a modest 12.5bp hike for the policy rate to 2.125% in December. (sherry.qin@wsj.com)

0523 GMT - The euro comes under pressure in Asia as eurozone political woes amplify the greenback's might, Maybank analysts say. Concerns over French sovereign bonds erupted last week after the country's public debt reached 119% of GDP and was projected to head toward 122%, the analysts write. Most worrying are plans to borrow a record sum in 2027 to help finance spending and repay debt, they add. There are signs of contagion as the yields of other debt-laden peripheral eurozone economies, like Greece and Italy, are surging. Markets have pared expectations for rate increases by the European Central Bank, but still expect one hike this year. The euro is down 0.6% to 1.1184 dollars after touching 1.1161 earlier, the lowest intraday level since May 2025, LSEG data show.