Financial markets continue to show signs of unrest and change, with yields US treasury bonds remaining close to lows not seen in almost two months.
In that context, the 10-year performance is heading towards its biggest monthly decline since the difficult year of 2008generating a series of reflections on the direction of interest rates.
During November, the yield on the benchmark 10-year note has plummeted to 60 basis points, marking a decline not seen since the 70 basis point decline in December 2008a critical moment in which the Federal Reserve took drastic measures to address the economic and financial problems of the time.
Despite signs of strength in the US economy, with continued job growth, sustained spending and activity during 17 months of almost uninterrupted increases in interest rates by the central bank, Investors seem increasingly convinced that a rate cut could be around the corner.
Pressure on consumer prices is decreasing notably and the indicators They point to a gradual slowdown of the economy, not a recession. In just one month, the market has transformed its expectations from anticipating moderate rate cuts to considering the possibility of the Federal Reserve cutting rates by a full percentage point next year, with the first cut likely occurring in March.
Bonds: the impact of market analysis
The next participation of the president of the Federal ReserveJerome Powellin a discussion at Spelman College in Atlanta, is scrutinized by traders for any hint that might justify the current trend in bonds.
Although short-term yields also decline in November, the decline is less pronounced. Two-year bond yields, which tend to be more sensitive to changes in the outlook for interest ratesdecreased by 42 basis points, the largest decrease since March of this year, when they fell 73 basis points.
These movements impact the dollar, which registered a loss of 3.4%, while the S&P 500 experiences its best monthly performance since July 2022, with an increase of 8.5%.
Data on consumer spending and price pressures are expected to to be published later, confirm the market belief that interest rate cuts are coming in the United States.
Source: Ambito
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