The inflation data in the US hits the stock markets and bonds soar

The inflation data in the US hits the stock markets and bonds soar

The New York Stock Exchange opened this Wednesday with sharp falls, hit by inflation that is gaining strength in the United States and calls into question a lowering of interest rates this year by the US central bank (Fed). For their part, European markets also fell by up to 1%.

In the first operations, the Dow Jones lost 0.94%, the technological Nasdaq 1.22% and the expanded index S&P 500 1.08%.

The returns of the United States Treasury bonds rose on Wednesday after inflation data came in higher than expected, lifting the benchmark 10-year yield more than 10 basis points to 4.5%, its highest level since November last year.

U.S. consumer prices rose more than expected in March due to rising gasoline and housing costs, casting further doubt on whether the Federal Reserve will begin cutting interest rates in June.

Two-year bond yields, which more closely reflect monetary policy expectations, rose nearly 20 basis points, later trading at 4.937%, also their highest level since November.

Federal Reserve fund futures traders lowered their expectations for interest rate cuts to a total of 43 basis points by 2024, down from 67 points prior to the inflation data.

The consumer price index rose 0.4% last month, after advancing the same margin in February, the Department of Labor’s Bureau of Labor Statistics (BLS) reported Wednesday. In the 12 months to March, the CPI rose 3.5%.

Economists consulted by Reuters had predicted that the CPI would rise 0.3% in the month and 3.4% in year-on-year terms.

Short-term interest rate futures in the United States plunged after the report, with traders betting on a first cut in September and only two cuts this year, less than the three cuts that monetary policy makers in the Federal Reserve had indicated as probable in March.

The first test of investors’ appetite for Treasury bonds will come Wednesday, when the government auctions $39 billion in 10-year bills.

Source: Ambito

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