Global bond yields likely to gain as market expects hawkish July FOMC minutes

The global bond yields are expected to gain on expectations of hawkish July FOMC meeting minutes. The minutes from the 26 - 27 July FOMC meeting will be published on Wednesday, 17 August at 18:00 GMT.

Investors will remain keen to focus on this release in an attempt to predict the central bank's likely step to hike interest rates in the upcoming monetary policy meeting, particularly in the wake of the UK’s Brexit vote.

Considering that the rates were increased in the December meeting, markets will look towards any significant benchmark measures of note (employment or otherwise) that could possibly provide a guide for policy moving forward.

Though the Fed Funds rate is expected to remain exceptionally low for some time, the debate over the timing of the Fed’s next move is something that could receive additional clarity via these minutes.

The US Fed’s William Dudley (voter in 2016) said that his overall views have not changed much and that he is looking for stronger second half of 2016 growth than was seen to start the year. Dudley reiterated that we are edging closer towards the point where it will be appropriate to raise interest rates further, noting that September was possible. He also added that the Fed Funds futures were underpricing the likelihood of policy tightening.

Bloomberg’s implied portability for a rate hike increased to 51 percent by December, up from 42 percent at the end of last week. Also, September hike possibility moved higher to 22 percent probability, up from 16 percent last week.

Looking ahead, we foresee that the upcoming hawkish FOMC July minutes will create an opportunity to go short.