U.S. Treasury yields generally fell on Wednesday, and the benchmark 10-year U.S. bond yield fell below the 4% mark during the session, as weak U.S. economic data and the Bank of Canada hike rate unexpectedly fell short of expectations, causing the market to speculate that Fed hike rate hike rate hike rate hike rate at the end of the year. At the same time, as long-term bond yields led the decline overnight, a yield curve that Fed officials have paid great attention to in the past has finally turned upside down.
market data shows that the 10-year U.S. Treasury yield fell below 4.0% overnight, the first time in more than a week, and eventually fell about 10 basis points to 4.011% throughout the day.
other terms of yields also weakened across the board: the 2-year U.S. Treasury yield fell 7 basis points to 4.418%, the 5-year U.S. Treasury yield fell 7.6 basis points to 4.192%, and the 30-year U.S. Treasury yield fell 12.3 basis points to 4.143%.
Following the poor U.S. economic data released on Tuesday, the latest U.S. Department of Commerce's new home sales data also performed sluggish again on Wednesday - the seasonally adjusted annualized rate of U.S. new home sales fell by 10.9% to 603,000 units in September, down from the 677,000 units revised last month. The slip reversed a sharp increase in August, as demand for housing weakened due to rising mortgage rates and high housing prices. The weak economic data performance of
has led to US Treasury yields and the US dollar overall maintaining the decline in the previous trading day. Viraj Patel, senior strategist at Vanda Research in London, said, "The market now has no confidence and motivation for chasing hawkish Fed transactions, especially when you see the housing data sending warnings of over-squeezing concerns, so we are beginning to see 10-year U.S. Treasury yields lower." In addition to the data being weak again, the Bank of Canada's decision to unexpectedly slow down the pace of interest rate hikes overnight has also dragged down the trend of U.S. Treasury yields. Some market insiders said the Bank of Canada's interest rate hike on Wednesday was less than expected, which could suggest that the tone of the central bank's tightening policy will slow down.
The Bank of Canada announced on Wednesday that it would raise the benchmark overnight lending rate by 50 basis points to 3.75%, less than the market and most economists expected 75 basis points. The Bank of Canada raised interest rates by 75 basis points last month, and the rate hike in July once reached 100 basis points.
Bank of Canada Governor Tiff Macklem said at a press conference, "The tightening cycle is coming to an end, and we are closer to the end, but it is not yet at the end."
Currently, globally, calls for a shift in austerity policies are getting higher and higher. The Fed expects another 75 basis points rate hike at next week's interest rate meeting, but expectations for another 75 basis points rate hike in December have plummeted to about 25%.
The yield curve that the Federal Reserve attaches most importance to is finally inverted
Since this week, the benchmark 10-year U.S. Treasury yield, which had previously risen for 12 consecutive weeks, has finally begun to fall from a high level. However, the rise in the short-term Treasury bond yield has not stopped. This also made the bond market yield curve that the Federal Reserve has always attached great importance to - the 3-month and 10-year U.S. Treasury yield curves, finally completely fell into an inverted situation.
10-year Treasury bond yield fell below the 3-month Treasury bond yield on Wednesday. The current difference in yield between the two is -8 basis points. The inversion of this curve usually occurs at the end of the Fed's tightening cycle, because the 3-month Treasury bond yield tracks policy interest rates, while the 30-year yield reflects expectations for economic growth and inflation.
Although the highly-watched yield curves such as 2-10 years and 5-30 years have seen significant inversions in many times this year, the difference in yields between 3-month and 30 years will undoubtedly attract more attention from the Federal Reserve.
In the past, the inversion of the treasury yield curve of 3-month and 10-year Treasury yield curve is indeed a precursor to the recession. In March 2020, the yield gap once reached a negative 0.28 percentage points. In 2019, 2007 and 2000 curves were deeply inverted, and they all happened at the end of the Fed's tightening cycle.
"The current level of this indicator, which is regarded by the Federal Reserve as a barometer, will surely cause concern, and the Federal Reserve will definitely pay attention to this. The bond market has a feeling that they will soon slow down the rate hike and take a step back."Gregory Faranello, head of U.S. interest rate trading and strategy at AmeriVet Securities, said. Tom di Galoma, managing director of Seaport Global Holdings LLC, also believes that the 3-month and 10-year Treasury yield curves have been an important indicator of the Fed's observation in the past. "I hate the use of the 'steer' statement, but I do think the Fed is moving away from excessive austerity policies. "Hot
is still lowering expectations on the eve of the release of the data? Tonight, the US third-quarter GDP may cause waves
Looking forward to the day, the focus of the US bond market will undoubtedly turn to European Central Bank interest rate resolution and the US third-quarter GDP initial value data. Among them, the US GDP data, which was still being revised by market participants on the eve of the release of the data, may undoubtedly be full of uncertainties.
The US Department of Commerce will release the US third-quarter GDP data at 20:30 Beijing time on Thursday. Currently, the market The market generally expects that the initial annualized GDP rate in the third quarter will increase by 2.4%. However, it is quite interesting that after the release of US trade data on Wednesday, some forecasters have lowered their forecasts, and some economists' downward magnitude is even close to a percentage point.
The main reason why these economists lowered their GDP expectations was that the U.S. imports unexpectedly rose to nearly $270 billion in September, the first time since March has recorded growth.
You should know that increasing imports have always been a deficit for GDP data, while rising exports are a plus. If too many imports lead to an increase in inventory, it will also create economic growth.
In addition, although the U.S. third-quarter GDP is expected to achieve its first positive growth this year tonight, this data may also conceal a lot of other unoptimistic information, such as slowing consumption growth and a sharp deterioration in the housing market. Many economists believe that the U.S. economy will fall into recession in the next 12 months as the Federal Reserve raises a sharp interest rate.
Economists expect that data released on Thursday at the same time as GDP will show that inflation-adjusted personal consumption spending increased by only 1% in the third quarter in the third quarter, the lowest level since the outbreak, which was only half of the previous quarter.
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From Whirlpool to P&G , many companies have noticed that shoppers are feeling the pressure, some have reduced purchases, and economists also believe that consumer demand is beginning to be damaged. This may be a worrying signal that consumer spending, as the engine of the US economy, is losing momentum.
Most economists expect that by the end of this year, the growth rate of American spending will remain relatively sluggish, and the overall uncertainty of consumer spending will put pressure on a range of companies.
This article is derived from Cailianshe
This article is from Cailianshe
