SPTS - Rates Spark: The Fed Builds While The ECB Monitors
2024-07-09 03:04:00 ET
Summary
- A more dovish Powell would help firm up the September cut expectations ahead of the CPI release due Thursday.
- Whereas in the US, we see the rate-cutting narrative picking up momentum; in the Eurozone, the direction is less evident.
- The 10Y Bund yield is close to 2.5% again, an area it has been trading around since April.
By Michiel Tukker | Benjamin Schroeder | Padhraic Garvey, CFA
Treasuries poised should Thursday's CPI report play ball
Treasuries had their post-presidential debate mini-tantrum, but have calmed since. The 10Y is back in the 4.25% to 4.30% area, and looking for an excuse to dip lower. The rationale for doing so can come from Thursday's CPI report for June. The May report had enough there for us to pivot from being bearish on Treasuries to positioning for a more definite rate-cutting tendency ahead. Our view having seen that report was that it was repeatable in June, and beyond. If that is the case, the rate cut discount for September can harden further....
Rates Spark: The Fed Builds While The ECB Monitors