U.S. Treasuries closed the week with heavy losses flowing from the release of a stronger than expected November Jobs Report. Average hourly earnings growth (actual 0.4%; consensus 0.2%) exceeded estimates and unemployment unexpectedly fell to 3.7% from 3.9% (consensus 3.9%). There was a slight shift in rate cut expectations after the report with the market no longer expecting a cut in March, but it still sees a strong likelihood of a cut in May (78.4% vs. 89.0% yesterday). Next week … Continue reading “Bond Traders Weekly Outlook: Catalysts Galore with Treasury Supply and Global Central Bank Overload”
Bank of Canada Holds Rates at 5.00%, Economy No Longer in Excess Demand
Bank of Canada held its overnight rate to 5.00% in December 2023 as expected by markets, following up the no change from the previous meeting. The market is pricing in about a 20% chance of a January rate cut. A March cut remains 90% priced in. BOC said “suggest the economy is no longer in excess demand.” BOC saw “further signs that monetary policy is moderating spending and relieving price pressures” The bank repeated that it ” is prepared to … Continue reading “Bank of Canada Holds Rates at 5.00%, Economy No Longer in Excess Demand”
Reserve Bank of Australia Leaves Rates Unchanged at 4.35%, Leans Dovish
The Reserve Bank of Australia kept rates unchanged at 4.35% as widely expected by analysts after last month’s 25bps hike which was the RBA’s 13th cash rate hike since they began this hiking cycle in May of 2022. The cash rate at 4.35% is the highest level since May 2012. Of note was the more dovish tone and the nod towards data dependance; “Whether further tightening of monetary policy is required to ensure that inflation returns to target in a … Continue reading “Reserve Bank of Australia Leaves Rates Unchanged at 4.35%, Leans Dovish”
Bond Traders Weekly Outlook: Bonds Rally on Rate Cut Bets, Despite Powell Caution
U.S. Treasuries opened December with a strong rally that sent rate-sensitive two-year yields reached a five-month low at 4.56 per cent. Benchmark 10-year Treasury yields dipped as low as 4.21 per cent, down 0.14 percentage points on the day, a level last seen during the first half of September. The move followed remarks by Federal Reserve chair Jay Powell failed to stem growing rate cut bets. Treasuries entire complex raced to fresh highs after the release of the ISM Manufacturing … Continue reading “Bond Traders Weekly Outlook: Bonds Rally on Rate Cut Bets, Despite Powell Caution”
Austere Bond Rally in November Saw Best Bonds Performance Since 1985
U.S. Treasuries in November saw one of their sharpest most potent rallies in thirteen years, a combination of a short covering rally in an overcrowded short bond trade and economic data impacts. Overall, the US bond market had it’s best year since 1985. The month saw a big rally across the curve amid rising rate cut expectations for the middle of next year. The 10-yr yield lost more than 50 bps for the month, which was the largest drop in … Continue reading “Austere Bond Rally in November Saw Best Bonds Performance Since 1985”
Bond Traders Weekly Outlook: Bonds Eye New Supply, PCE Ahead
U.S. Treasuries closed the shortened week broadly lower. Treasuries followed Thanksgiving with a lower start that returned the 30-yr yield to little changed for the week while yields on shorter tenors were pushed above their closing levels from last week. The 2-yr note showed a five-basis point increase in yield for the week while the 10-yr yield rose three basis points since last Friday, pressuring the 2s10s spread to -48 bps from -46 bps at last week’s settlement. There is … Continue reading “Bond Traders Weekly Outlook: Bonds Eye New Supply, PCE Ahead”
Bond Traders Weekly Outlook: Bonds Rally Gained Legs, 20 Year Ahead to Test Resolve
U.S. Treasuries saw a strong bid, which sent yields to fresh low for the month this week across the curve, pressuring yields to levels not seen since September. Eurozone’s final CPI report for October showed the seventh consecutive deceleration in the yr/yr rate to 2.9%. The 30-yr yield saw its lowest close since late September. Fed Governor Barr (FOMC voter) said that policy is at or near the peak rate. This week compressed the 2s10s spread by four basis points … Continue reading “Bond Traders Weekly Outlook: Bonds Rally Gained Legs, 20 Year Ahead to Test Resolve”
Bond Traders Weekly Outlook: Woeful Long Bond Auction and Powell Sets Tone
U.S. Treasuries U.S. Treasuries finished the week mixed with the long bond rebounding from Thursday’s slide after its woeful auction Thursday. The offering tailed by a record 5.3 bps with the lowest bid-to-cover ratio in nearly two years and lowest indirect takedown in two years. The long bond yield settled within a basis point of its 50-day moving average (4.728%). Shorter tenors extended this week’s show of relative weakness. Reports about a ransomware attack that crippled the Industrial and Commercial … Continue reading “Bond Traders Weekly Outlook: Woeful Long Bond Auction and Powell Sets Tone”
Reserve Bank of Australia Raises Rates to Ten Year High 4.35%, Inflation Pressures Cited
The Reserve Bank of Australia announced a +25bp interest rate hike, as widely expected by analysts after last month’s inflation reports. It is the RBA’s 13th cash rate hike since they began this hiking cycle in May of 2022. The OIS market had been pricing the probability of a rate hike at 50/50. The cash rate at 4.35% is the highest level since May 2012. Prior to this meeting the RBA has left the cash rate unchanged at four consecutive … Continue reading “Reserve Bank of Australia Raises Rates to Ten Year High 4.35%, Inflation Pressures Cited”
Bond Traders Weekly Outlook: Bond Market Risk Reversals Are Fast and Furious
U.S. Treasuries had a spectacular week in trapping the late to the party bond bears this week. Friday’s post-NFP pop sent yields on 5s and 10s back through their respective 50-day moving averages that grabbed so many bears to board not long ago. The somewhat smaller-than-expected Treasury quarterly refunding had helped bonds earlier as did the transformation of a “hawkish pause” to “dovish likely done” FOMC. Ten-year Treasury yields slumped 26 bps this week, the biggest weekly drop since March … Continue reading “Bond Traders Weekly Outlook: Bond Market Risk Reversals Are Fast and Furious”