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

0739 GMT - Climbing two-year U.S. Treasury yields in the past month reflect investors' worry that the pace of interest rate rises necessary to mitigate inflation might have to come at a swifter pace than the Federal Reserve's current guidance, Morgan Stanley Wealth Management says. The two-year UST yield almost doubled to over 0.50% in the past month, the highest level since March 2020, it says. Another sign of the market's weakening faith in the Fed's inflation stance is the flattening of the two-year/10-year yield curve, which indicates skepticism about economic growth prospects, it says. "This is where we think bond investor pessimism is excessive," Morgan Stanley Wealth Management says. The two-year US Treasury yield last trades at 0.474%, according to Tradeweb. (emese.bartha@wsj.com)

0731 GMT - NatWest Markets expects the U.S. FOMC to announce tapering of its asset purchases at this week's meeting, with tapering beginning later this month, it says. NatWest Markets looks for a reduction of $15 billion of the monthly asset purchases, including $10 billion in Treasurys and $5 billion in agency mortgage-backed securities, with the taper concluding in the middle of 2022, it says ahead of the coming Federal Reserve meeting. Fed Chair Jerome Powell is likely to emphasize how tapering allows the Fed flexibility in responding if the economy evolves in a way that deviates from the committee's outlook, NatWest Markets says, which expects the market to take the reduction in asset purchases in stride. (emese.bartha@wsj.com)

0724 GMT - Eurozone government bond yields fall early Tuesday, reversing some of the recent selloff which might have been excessive. The rise in eurozone government bond yields is exaggerated, DZ Bank says, expecting the recent selloff on the bond market unlikely to continue. "Although the European Central Bank will probably buy significantly fewer bonds in 2022 than in 2021, we do not expect 10-year Bund yields to rise significantly on a twelve-month horizon," DZ Bank analyst Birgit Henseler says. DZ Bank expects inflation and monetary policy to be the primary drivers of Bund performance in the weeks ahead. Eurozone 10-year government bond yields drop by up to 5 basis points, with the 10-year Bund yield down 3.9 bps at -0.131%, according to Tradeweb. (emese.bartha@wsj.com)

0649 GMT - The Singapore dollar is trading steadily against USD in the afternoon Asian session ahead of the FOMC's two-day meeting that begins later today. However, SGD could be supported by prospects of tighter monetary policy by the Monetary Authority of Singapore. MAS Managing Director Menon said the central bank is watching for signs of accelerating inflation and is ready to act, Maybank says, noting media reports of a televised interview. USD/SGD is little changed at 1.3481. (ronnie.harui@wsj.com)

0615 GMT - Japan's Nikkei Stock Average fell 0.4% to close at 29520.90 as the yen strengthened and investors turned cautious before the FOMC's two-day meeting that starts later today. Among the worst performers, Japan Exchange Group slipped 4.6% and Mitsui & Co. dropped 4.0%, while Kyowa Kirin slid 6.4% after reporting its nine-month net profit fell 12% on year. Meanwhile, TDK and Kyocera climbed 8.7% and 5.3%, respectively, after raising their fiscal-year revenue, net profit and dividend forecasts. USD/JPY was at 113.69 compared with 114.23 as of Monday's Tokyo stock-market close. The yield on the 10-year Japanese government bond was down 1 basis point at 0.080%. (ronnie.harui@wsj.com)

0559 GMT - The Reserve Bank of Australia's removal of its 0.1% yield target on April 2024 Australian government bonds indicates upward pressure on fixed mortgage rates, AMP says. Shane Oliver, AMP's head of investment strategy and chief economist, sees pressure on the two- and three-year rates that have recently become more popular in a local market traditionally dominated by variable-rate mortgages. This will affect new borrowers and implies a weakening of housing demand heading into next year, he adds. (stuart.condie@wsj.com; @StuartLCondie)

0515 GMT - Australian wage growth isn't likely to hit levels determined by the Reserve Bank of Australia as necessary for a higher cash rate until late in 2022, according to Capital Economics. The RBA will likely raise the cash rate from its current record-low 0.1% in February 2023, the research consultancy says. It sees a rate of 0.75% by the end of 2023, rather than the 1.75% priced into financial markets. CE also thinks the RBA will scale back its bond purchases in February but won't end them completely until August. It reckons the central bank will initially cut its weekly bond purchases to A$3 billion from A$4 billion. (stuart.condie@wsj.com; @StuartLCondie)