Week in review
- U.S. Federal Reserve lowered rates by 25bps
- Bank of England lowered rates by 25bps
- China exports rose to 12.7% y/y, above consensus of 5.0%
Week ahead
- U.S. CPI
- China industrial production, retail sales and FAI
- Japan 3Q GDP
Thought of the week
The combination of the U.S. elections and the Fed meeting has marked one of the, if not the most, eventful week for this year thus far. From the perspective of rates market, U.S. treasury yields rose on election day with the curve bearishly steepened but gave half back the following day on the Fed’s decision to lower interest rates by 25bps with a belly-richened curve. These largely reflect the likelihood of more debt-fuelled fiscal stimulus from a Republican sweep and the expectation of a reflation-growth outlook in the U.S. economy. While current yields may hint an opportunity to add long-term treasuries, the relative valuation versus short-term yields are less attractive. A widened financing gap also requires more treasury issuances, which increases supply and adds upside risk for long-term yields. That said, a more unified government should see a smoother process on the upcoming debt ceiling legislation expiry.
2-year and 10-year U.S. treasury yield
Since start of 2024
Source: FactSet, J.P. Morgan Asset Management. Data reflect most recently available as of 8/11/24.
Market data
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