October 28, 2024
Rates were still the main market driver. The U.S. 10-year Treasury yield rose to 4.26%, the highest level since July, as investors reduced expectations for aggressive Fed cuts. Interest-rate swaps implied about 128 basis points of cuts through September 2025, down from 195 basis points right after the Fed's 50 basis point September cut. Japan's 40-year government bond yield also moved higher to 2.535%.
Leveraged finance stayed active despite higher base rates. Junk-rated bond and loan issuance reached $109.7 billion in September, the third-highest monthly total since 2005. Spreads between junk bonds and Treasuries narrowed near 14-year lows, letting weaker companies refinance, extend maturities, and in some cases fund dividends. For recruiting, this is a useful capital markets point: high rates do not automatically close the market if spreads are tight and risk appetite is strong.
The maturity wall looked less immediate. Junk-rated obligations due in 2025 fell from $347 billion last year to $65 billion after refinancing activity. Belron issued a record $9 billion of junk debt for refinancing and shareholder dividends, though the deal triggered a downgrade. Chobani sold $650 million of bonds with flexible payment terms and raised more than planned. Average coupons rose to 6.34% from 5.7% in 2022, but many issuers were still replacing debt from the zero-rate period.
Housing showed the real-economy impact of higher yields. Existing home sales fell 1% to a 3.84 million annual rate, the lowest since October 2010. The 30-year mortgage rate rose 70 basis points to 6.85%, and inventory remained about 20% below the level from five years earlier as owners held onto low-rate mortgages.
Equity stories were more mixed. Tesla rose nearly 21%, adding more than $140 billion of market value, after Elon Musk projected 20% to 30% vehicle sales growth next year and reported a 17.05% profit margin. Arm canceled Qualcomm's chip design license in an IP dispute tied to Qualcomm's $1.4 billion Nuvia acquisition. McDonald's dropped 10% after an E. coli outbreak tied to 49 infections and one death. Genesys confidentially filed for a U.S. IPO after cloud platform revenue exceeded $1.6 billion, up more than 35% year over year.