Treasury yields sit above 5% as the Fed turns to raising rates
The Federal Reserve raised its target range by a quarter point to 3.75%–4.00% in September, its first increase since 2023, with Chair Kevin Warsh saying inflation has been too high for too long. The 10-year Treasury yield ended last week at about 5.24% and the 2-year at about 4.80%, near the highest levels in two decades. September inflation figures are due on Wednesday 14 October, with forecasts pointing to headline CPI rising to about 3.6%–3.7% from 3.4%, largely because of petrol prices. The next Fed meeting is on 27–28 October.
Warum es zur Sprache kommt
Rates come up in almost every sales and trading interview, and bankers are asked how higher financing costs change valuations and deals.
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Start with the mechanism: a tighter Fed and sticky inflation push yields up, and bond prices fall as yields rise. A bond with a duration of 8 loses about 2% for a 0.25-point rise in yields.
Link it to valuation: a higher risk-free rate raises the discount rate in a DCF, which hurts long-duration equities such as high-growth technology the most.
Read the curve: with the 10-year near 5.24% and the 2-year near 4.80%, the curve slopes upward by about 44 basis points. Be ready to say what usually moves each end.
Know the dates: September CPI on Wednesday and the Fed decision on 28 October.
Schneider Electric agrees to buy PTC for $22.6bn in cash
France's Schneider Electric has agreed to buy PTC, the Boston-based maker of industrial design and engineering software, for $205 a share in cash: about $22.6bn, or about $23.7bn including debt. The price is a 42.3% premium to PTC's last close of $144.03 before the announcement. Schneider expects about €250m a year of cost savings by the third year and plans to complete the deal by the third quarter of 2027, subject to regulators and PTC shareholders. It is Schneider's largest acquisition, ahead of its purchase of the UK's Aveva, completed in 2023.
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A live cross-border deal with every classic M&A question in it: premium, synergies, strategic rationale and financing.
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Check the premium: $205 against $144.03 is about 42%. That's high, so the case rests on synergies and strategic fit.
Test the value: capitalized at 10x, €250m of yearly savings is worth about €2.5bn before integration costs, against a premium of roughly $6.7bn. Ask what else must justify the price, such as revenue synergies or the strategic position in industrial software.
Discuss financing: an all-cash deal this size is usually funded with cash on hand and new debt. Ask what it does to the buyer's leverage and credit rating.
Mention the precedent: Schneider has done this before with Aveva, so integration experience is part of the argument.
Bank earnings start on Tuesday: watch investment banking and trading
JPMorgan reports third-quarter results on Tuesday 13 October, with other large US banks reporting this week. In September, JPMorgan co-President Doug Petno said investment banking fees and markets revenue were expected to rise by the mid-to-high teens in percent from a year earlier, and described the M&A pipeline as being as strong as it had been in some time. The results will show whether the recovery in deal-making and trading continued over the summer.
Warum es zur Sprache kommt
Interviewers at banks expect you to know how their firm and its peers did last quarter, and what drove it.
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Know the drivers: investment banking fees (M&A advice, debt and equity issuance), markets revenue (trading) and net interest income.
Compare results with guidance: JPMorgan pointed to growth in the mid-to-high teens, so the market will judge the numbers against that, not only against last year.
Make it specific to your interview: which divisions of that firm grew, and what management said about the pipeline for the next quarter.