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U.S. Treasury yields slump on hopes of 25bp Fed rate cut; Chair Powell’s post-conference speech eyed
U.S. Treasury yields slightly recover on stabilising risk sentiments overnight; uncertainties still hover
The U.S. Treasury yields recovered during Friday’s afternoon session as risk sentiments started to stabilize overnight, following comments from President Donald Trump that a call with China is scheduled around the corner concerning trade tariffs.
However, uncertainties still remain as a couple of US Federal Reserve members, Kashkari and Bullard continue to indicate to the likelihood of further interest rate cuts in the country, although the latter (voter 2019) suggested that there was no urgency to take action between scheduled meetings, Lloyds Bank reported.
The yield on the benchmark 10-year Treasury yield jumped nearly 3-1/2 basis points to 1.559 percent, the super-long 30-year bond yields surged nearly 4-1/2 basis points to 2.023 percent and the yield on the short-term 2-year traded 2 basis points higher at 1.515 percent by 12:00GMT.
Market participants are pricing in a 41 percent probability for rates to be lowered by 50bp in September, compared to a 31 percent probability at the beginning of the week.
The minutes and Powell’s speech will be closely monitored for forward guidance on future interest-rate setting. Any dovishness is likely to spur a risk rally, which will be positive for equity stocks and EM currencies, RMB Global Markets Research and Sales reported.
Risk assets were further helped by better-than-expected US retail sales data. July’s figure rose by 0.7 percent m/m, higher than the consensus estimate of 0.3 percent and up from June’s downwardly revised 0.3 percent. While manufacturing and industrial production for July decreased more than expected, the Empire State Manufacturing index gained 0.5 points to 4.8 in August against expectations for a decline to 2 – a signal that manufacturing production will probably increase in August, the report added.
Meanwhile, the S&P 500 Futures traded 0.85 percent higher at 2,872.38 by 12:10GMT.