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Traders added to wagers that the Federal Reserve will cut interest rates by another quarter point next month after in-line inflation data, spurring gains for Treasury debt.
The rally trimmed yields on two-year notes, more closely tied than longer tenors to Fed rate decisions, by as much as 10 basis points to 4,24 percent.
Swaps traders boosted to about 80 percent the probability that the Fed will cut rates again on 18 December, up from around 56 percent earlier Wednesday.
Through June, they priced in just over 60 basis points of cumulative reductions.
The October consumer price index data quelled concern about halting progress toward lower inflation even before President-elect Donald Trump takes office in January. Bond traders in the weeks leading up to the November 5, 2024 election — which pollsters said was too close to call — had lowered their expectations for additional Fed rate cuts over the coming year.
“Bang in-line core inflation leaves the Fed on track to cut rates in December,” said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management.
“After a run of unseasonably hot autumn data, today’s number cools fears of an imminent slowdown in the pace of rate cuts.”
Longer-dated rates declined less, then rebounded amid the latest surge in new corporate bond sales.
Yields remain near the highest levels in months, reached in the week since the election of Trump, whose tax policies have been predicted to be inflationary.
Republicans also won control of both chambers of Congress, news networks said Wednesday after the final House races were called, facilitating implementation of the policies.
Consumer prices rose 2,6 percent year-on-year in October overall and 3,3 percent excluding the volatile food and energy categories.
Both figures matched the median forecasts of economists in a Bloomberg survey. The figures underscore the slow and frustrating nature of the battle against inflation, which has often moved sideways — sometimes for months at a time — on its broader path down. – Bloomberg
leeroy mupariri
