Daily digest market movers: Bond market pricing
- Although the week has started very calmly, the US Dollar is stronger by 0.5% against the Korean Won (KRW) and the Japanese Yen (JPY) in early European trading.
- Bloomberg reports that in a column on Friday, the People’s Bank of China (PBoC) reported that the PBoC will keep a close eye on the potential rate cuts from the US Federal Reserve (Fed) and will act accordingly to keep the Yuan (CNY) stable against the US Dollar (USD). That could mean substantial devaluations for the CNY once the US Dollar devalues on the back of interest rate cuts from the Fed in order to catch up on the move.
- At 15:30 GMT, the US Treasury will allocate a 3-month and a 6-month bill.
- The US Monthly Budget Statement for July is expected at 18:00 GMT. Expectations are for a deficit of $254.3 billion, coming from a $66 billion deficit.
- Equity markets are going for a calm start to the week. Most major indices are in the green by less than 0.5%.
- The CME Fedwatch Tool shows a 53.5% chance of a 25 basis points (bps) interest rate cut by the Fed in September against a 46.5% chance for a 50 bps. Another 25 bps cut (if September is a 25 bps cut) is expected in November by 42.1%, while a 48.0% chance for a 50 bps cut and 9.9% for a triple rate cut are being pencilled in for that meeting.
- The US 10-year benchmark rate trades at 3.96% after popping above 4.00% briefly on Thursday
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