Filtered by Topic: Monetary Policy Use setting Monetary Policy
We still expect Treasury yields to rise by the end of the year, despite the seemingly reassuring news for bonds from the Fed on Wednesday. There were, at face value, a few things for Treasury investors to take heart from in the latest Fed meeting. The …
20th March 2025
While today's US PPI print supports our view that the Fed will stand pat this year, comments from central bankers in Canada and Japan suggest they may have different views about how over how to respond to the impact of US tariffs on domestic inflation and …
13th March 2025
We still think the PBOC will allow the renminbi to depreciate against the US dollar, perhaps quite significantly, by the end of the year. We suspect there are a few reasons that China’s central bank declined to cut its benchmark Loan Prime Rates today …
20th February 2025
We expect the Bank of England to cut faster and further than investors expect, pushing Gilt yields down and in turn weighing on the pound. The Bank of England (BoE) cut its Bank Rate by 25bp to 4.5% today, as widely expected. Even so, the tone of the …
6th February 2025
We think further tightening by the Bank of Japan will see the 10-year Japanese government bond (JGB) yield rise above that of the 10-year Chinese government bond (CGB), for the first time in more than two decades. The Bank of Japan’s rate hike today had …
24th January 2025
The Japanese yen has been boosted by the dip in US Treasury yields, and we think it will rally a bit further against the US dollar over 2025. One of the key beneficiaries of the dip in US Treasury yields since the December US CPI print has been the yen, …
16th January 2025
Although the Korean won has strengthened this year, we think its rally will unwind before long. The Korean won appears to have embarked on a relief rally lately, bucking the trend of broad US dollar strength. Admittedly, it edged down slightly against the …
8th January 2025
We think 2025 will be a better year for the Japanese yen against the US dollar than 2024 has been, as the relative monetary policy picture shifts more decisively in its favour. A Fed cut and a hold from the Bank of Japan (BoJ) might seem like a surprising …
19th December 2024
Given our dovish view of ECB policy, we expect German Bund yields to fall back in 2025, and to diverge further from US Treasury yields. Unlike the Bank of Canada (BoC) and the Swiss National Bank (SNB), the European Central Bank (ECB) cut its policy rates …
12th December 2024
We expect the New Zealand dollar to fall against the US and Australian dollars over the next year or so, and fare worse than most – if not all – other G10 currencies. Today’s as-expected 50bp rate cut by the Reserve Bank of New Zealand (RBNZ) didn’t move …
27th November 2024
We doubt upward pressure on Japan’s long-term bond yields will persist for long, as the Bank of Japan tightens policy by less than investors anticipate and yields in the US remain quite stable. The 10-year JGB yield has risen a lot since October. Despite …
19th November 2024
We expect the Japanese yen to bounce back before long, putting more pressure on the Japanese stock market, at least in local currency terms. The Japanese yen has fallen by more than 1% against the US dollar today, adding up to a roughly 8% fall since its …
23rd October 2024
We think government bond yields in the euro-zone will rebound a bit, particularly in those countries, like France, where public finances are concerning. The September PMIs released today for the euro-zone and its two largest economies painted a very bleak …
23rd September 2024
Markets barely reacted to the Fed’s 50bp rate cut, on balance, and our base case is that further cuts won’t move the needle too much either. The Fed started its easing cycle with a bang on Wednesday with a 50bp cut. That said, it was probably a “hawkish …
19th September 2024
Today’s decision by the ECB to cut the deposit rate by 25bp was widely anticipated, and even the press conference provided little new information. We stand by our view that too much easing is now discounted in money markets, which is why we think …
12th September 2024
Further mixed-to-weak US economic data and sharp falls in the equity markets last week means that, rightly or wrongly, the so-called “Fed put” is now back in the spotlight. Our sense is that it would still take a significant further deterioration in the …
9th September 2024
At Banxico’s meeting yesterday, worries over the weakness in the Mexican economy outweighed concerns over the sell-off in the Mexican peso and prompted the central bank to restart its easing cycle. Banxico’s disregard for the peso’s depreciation seems …
9th August 2024
Bond yields have fallen in the US and the UK after the Fed signalled an imminent rate cut and the Bank of England delivered one. But only in the UK do we see more room down for yields. US Treasury yields have fallen further following the Fed meeting …
1st August 2024
Although the Reserve Bank of Australia (RBA) – which left policy on hold today – looks set to be the last developed market central bank to join the easing cycle now underway among developed economies, we think more important for long-term bond markets …
18th June 2024
Today’s release of the US CPI data for May offered some respite in markets after last Friday’s stronger-than-expected May payrolls data. On balance, we continue to anticipate that the Fed will eventually cut by a bit more than what is currently priced …
12th June 2024
While euro-zone inflation data has recently surprised to the upside, which was reflected in the hawkish tone of today’s ECB meeting , we still think the 10-year Bund yield will fall faster than the 10-year Treasury yield by end-2024. Although today’s 25bp …
6th June 2024
The US stock market has been pulled in different directions by economic data since last week. But we suspect that the general trend in the next year or so will be up, as equities benefit from at least moderate economic growth, looser monetary policy, and, …
4th June 2024
The yield of 10-year Japanese government bonds (JGBs) is now almost where we forecast it to be at the end of the year. Admittedly, we doubt that the Bank of Japan (BoJ) will tighten policy as quickly as investors think in the next two years. But we …
28th May 2024
While stronger-than-expected inflation data from the UK have led us to push back a bit our forecast for the start of the Bank of England’s easing cycle, we still project many more rate cuts than most anticipate. This feeds into our view that Gilt yields …
22nd May 2024
While we expect government bond yields in most developed markets to fall back, we think that those in Japan will stabilise around their current levels. In turn, we anticipate that interest rate differentials will provide support to the yen. The yield of …
13th May 2024
Hikes are back on the agenda at some central banks and core PCE data for Q1 added to the hawkish mood in US markets. But we don’t think the Fed will feel the need to start hiking again. Indeed, given the path of underlying inflation, we continue to think …
25th April 2024
Even if the US dollar stays strong against most currencies this year, we think that much of the broad-based weakness in EM (emerging market) FX has run its course. While some EM central banks may now slow their easing cycles, major shifts in policy are …
24th April 2024
We expect corporate bond yields in the UK and euro-zone to fall as rate cuts in those economies push down risk-free rates and strong risk sentiment narrows spreads further. In contrast to the weaker-than-expected PMI data out of the US today, PMIs for …
23rd April 2024
Today’s UK CPI release has not made a sustained impact on investors’ expectations over the path of Bank Rate, and the market pricing implies that investors are still discounting fewer cuts from the Bank of England (BoE) than we are. This is why we expect …
17th April 2024
Today’s ECB policy announcement and press conference support our forecast for a June rate cut. Given that we expect more rate cuts than the money market discounts, we think that Bund yields will fall back towards 2.25% by the end of the year. Today’s …
11th April 2024
This week’s flurry of central bank meeting points to growing confidence among policymakers in most major economies that inflation is on track back to target. That supports our view that long-term government bond yields will fall back a bit further this …
21st March 2024
Our view that Treasury yields will fall back a bit and that the US dollar will generally weaken by the end of the year rests on the assumption that the Fed will deliver more rate cuts than currently discounted in money markets. So these forecasts are …
20th March 2024
Stronger-than-expected US core CPI data did not trigger as big a reassessment in rate expectations as they did last month in financial markets, and we still forecast the Fed to start easing policy around June. Given our view that it will eventually …
12th March 2024
We doubt that ECB policy will have much impact on German bond yields this year and next – if anything, risks are skewed to the upside. But the outlook may be a bit brighter for Italian bonds, and we expect the Italian-German spread to narrow. The yield of …
7th March 2024
Weaker economic data from the US have bolstered our view that the Federal Reserve will be able to cut rates by more than investors currently expect. As a result, we continue to think that Treasury yields will generally fall by the end of the year. …
15th February 2024
We expect government bond yields in emerging market (EM) economies to fall over the remainder of the year, helped by a broadening easing cycle and falling Treasury yields. While the big question around monetary policy in developed market (DM) economies is …
8th February 2024
Oil prices have had only limited impact on US Treasury yields recently, and we suspect that this will remain the case in the next couple of years. So far this month, oil prices have fallen back quite sharply. At around $72 per barrel (pb) at the time of …
5th February 2024
Ahead of the first Fed meeting of 2024, we think there are two points for investors to note about how the central bank might affect markets this year. First, while the Fed may be cautious today, we see scope for Treasury yields to drop a bit more. Despite …
31st January 2024
While US inflation for November was almost exactly as the analysts’ consensus had predicted, the yields of long-dated government bonds still rose a bit on the news in most places. But we continue to think that yields will generally fall over the next year …
12th December 2023
The global bond rally faced a setback today after the US employment report was released. But we think that yields will resume their downward march before long in most places, including the US. One exception is Japan, where we expect they will rise over …
8th December 2023
Despite the hawkish rhetoric from central bankers on both sides of the Atlantic, we still expect most long-dated government bond yields in developed markets (DM) to fall over the next couple of years. After a surprisingly hawkish message from the FOMC …
21st September 2023
We think the 10-year/2-year Treasury yield spread will become less inverted over the next year or so, but doubt this will come primarily via a continued rise in the 10-year yield like we saw last week. A striking part of last week’s Treasury sell-off was …
7th August 2023
Though investors appear to be increasingly moving towards our view of Bank Rate peaking at 5.50%, we think the levels priced into the market beyond this year – and, accordingly, expectations for gilt yields and sterling – are still too high. Today’s …
3rd August 2023
The Bank of Japan (BoJ) seems to have effectively ended yield curve control (YCC) without making a big splash in financial markets, but we wouldn’t rule out further effects – on Japan’s markets and those around the world – just yet. For a start, we …
28th July 2023
A disparate range of global central banks have delivered their latest policy rate verdicts over the past 24 hours. We think there are four key points for investors to note. First, European central banks are clearly still in hawkish moods. But while that …
22nd June 2023
We think UK real GDP rose a bit in April (07.00 BST) Euro-zone industrial production probably edged up in April (10.00 BST) We expect the Fed to leave interest rates unchanged (19.00 BST) Key Market Themes The 10-year Gilt yield has continued to march …
13th June 2023
We think Korea’s inflation fell in May, in line with weaker economic growth (00.00 BST) The US labour market probably loosened further last month (13.30 BST) Watch back today’s Drop-in on the outlook for EM equities on demand here Key Market Themes …
1st June 2023
We think UK retail sales contracted again last month (07.00 BST) US real consumption and durable goods orders probably picked up in April (13.30 BST) Meanwhile, we think US core PCE inflation rose by another 0.3% m/m (13.30 BST) Key Market Themes Higher …
25th May 2023
We think Turkey’s central bank will keep its policy rate at 8.5%... (12.00 BST) … while policymakers in South Africa will deliver a 50bp rate hike, to 8.25% (14.00 BST) Clients can sign up here for tomorrow’s Drop-In on China’s economic outlook Key …
24th May 2023
We think China’s Loan Prime Rate will be left unchanged (Mon.) We expect the Reserve Bank of New Zealand to raise its policy rate by 25bp, to 5.50% (Wed.) Real consumption in the US probably rebounded a bit in April (Fri.) Key Market Themes We suspect a …
19th May 2023
