Cailianshe December 1 (Editor Xiaoxiang) is affected by the continued fermentation of dovish remarks by Powell, chairman of the Federal Reserve , and the much-watched US PCE price indicators below expectations. On Thursday (December 1), the yield of US bond and the US dollar index fell sharply again, hitting a multi-month low. At present, although the Fed has more work to do in tightening the monetary policy, it will slow down the pace of hikes in its interest rate meeting later this month.
market data shows that the yield on the US Treasury bonds for each term of weakened again on Thursday. Among them, the 2-year US Treasury yield fell 8.7 basis points to 4.238%, the 5-year US Treasury yield fell 7.5 basis points to 3.666%, the 10-year US Treasury yield fell 9.6 basis points to 3.508%, and the 30-year US Treasury yield fell 13.5 basis points to 3.599%.
At present, the 10-year U.S. Treasury yield with the "global asset pricing anchor" has hit its lowest level since September after falling to around the 3.50% mark, and has plummeted by more than 80 basis points since the year's peak level. The US dollar index also weakened simultaneously with the yield on US Treasury. , the ICE dollar index, which measures the strength of the US dollar against a basket of six major currencies, further fell below the 105 mark overnight, and the latest fell to the 104.70 line, setting a new low since July this year.
Non-US currencies generally rose sharply overnight. euro against the US dollar rose above the 1.05 mark, setting a new high since late June. The pound and yen's gains against the US dollar intraday increased by more than 2% at one point. At present, the pound has risen above the 1.23 mark against the US dollar, also setting a new high since June; the yen fell to the 135.20 line, hitting a three-and-a-half-month low.
The bond exchange market trend reverses?
analysts said that the recent decline in US Treasury yields and the US dollar are the latest signs of a change in the market's expectations of the Fed's interest rate hike path. The Fed's interest rate hike path is a core factor that dominates the global market this year.
For most of 2022, the dollar exchange rate continued to soar, as markets bet that the Fed is raising interest rates in its fight to curb inflation than most other central banks . However, the dollar index has weakened significantly since last month's better-than-expected CPI report ignited hopes that the Fed would soon slow down its rate hike.
Another latest inflation data further supported the bet on Thursday that the US dollar and U.S. Treasury yields will continue to fall.
Data from the U.S. Department of Commerce shows that the annual rate of the core personal consumption expenditure index (PCE) price index in October rose 5% year-on-year, lower than the previous value of 5.10%, slowing for the fourth consecutive month. In October, the core PCE price index increased by 0.2% month-on-month, which was also lower than the market's expectations of a 0.3% increase.
Lombard Odier Investment Management stock director Didier Rabattu said: "What we are seeing in the United States is that some serious inflation drivers are disappearing, and prices in food, gasoline and real estate all seem to have peaked. The market believes that inflation has become history, and the Federal Reserve will adjust its policies soon, and the pace of rate hikes will slow down from December."
In terms of the stock market, the three major U.S. stock indexes rose and fell on Thursday. S&P 500 fell 3.54 points, or 0.1%, to 4076.57 points on Thursday. The Dow Jones Industrial Average fell 194.76 points, or 0.6%, to 34,395.01 points. Nasdaq Composite Index rose 14.45 points, or 0.1%, to 11,482.45 points. Financial stocks fell significantly overnight as investors fear banks might set aside more funds to cover potential credit losses, a move that would cut their profits .
Tonight focuses on November non-agricultural data
Outlook. The market is expected to focus closely on November US non-agricultural employment data that will be released tonight at 21:30 Beijing time.
Currently, economists surveyed by media estimate that the United States will add 200,000 new jobs in November, down from 261,000 the previous month. Economists also expect the U.S. unemployment rate will stabilize at 3.7% for the month, and the average salary increase will slow to 0.3% from 0.4% in October.
It is worth mentioning that in the non-farm forecasts of dozens of large investment banks including Goldman Sachs, Morgan Stanley , JPMorgan Chase , etc., the prediction numbers of these investment banks vary greatly. The highest forecast for the non-farm data in November is 270,000, while the lowest forecast is only 60,000.
Diane Swonk, chief economist at KPMG, said the November non-farm report "is more likely to see an unexpected decline." She noted that the number of workers taking leave due to illness may continue to be a trigger, and more companies have announced a freeze of recruitment. Retail is usually the highlight of November, but there are signs that the retail industry’s job growth is not as fast as usual this festive season.
Bank of America Chief American economist Michael Gapen is relatively optimistic. He expects that 225,000 jobs will increase in November, higher than market expectations. "There should be a directional slowdown in non-farms, but we expect the employment data to remain pretty good, and what I will look for is that interest rate sensitive industries are starting to show some signs of unemployment," Gapen said. He will closely monitor the construction industry and other industries that may be affected by the slowdown in the property market to see if there is more unemployment in the sector.
is expected tonight's specific performance of non-farms will not have much impact on the Fed's December resolution's rate hike. Many economists have said that the Fed should raise interest rates by 50 basis points this month even if the November employment report is stronger than expected. However, if the trend of slowing down in the US job market is too obvious, it may affect the market's bet on terminal interest rates next year.
According to the pricing of the interest rate futures market , traders now expect the Fed to raise its main interest rate to a peak of about 4.9% next year, while the forecast at 5% at the beginning of this week and the high in early November was 5.14%.
Market participants also expect interest rates to quickly fall back to 4.4% by the end of 2023, although Fed officials repeatedly asserted that once interest rates peak, they will remain high for a longer period of time.
This article is from Cailianshe
