It’s been almost two weeks since the Federal Reserve made the decision to begin lowering interest rates with a 50 basis point cut, setting the benchmark at 5%. The market there clearly bought with the rumor and sold with the news, since this moment coincided with the highest price (minimum profitability) of the year for US debt.
In this context, the 10-year US bond is now trading in the 3.77% zone, 15 basis points above the minimum it had marked after the rate cut, which was 3.61 %. For those who buy on this land, losses already reach 1.25%.
“Concerns about the possibility of a recession in the United States intensified after the employment figures published in August,” underlines Crédit Mutuel AM. It should be remembered that this week the update of this data for the month of September will be published. “Even though the most recent data indicates a slowdown in activity, we believe that US growth continues to show a favorable trend, particularly consumption, which has been supported by various factors,” they add.
The market is now pricing in the fact that the Fed will end the year by lowering rates in 2017. 75 basis points morebetween the November and December meetings. However, in recent days the probability of this scenario occurring was practically 100%, while today it is a little lower.
From Julius Baer, they explain that “given the greater likelihood of seeing a soft landing, long-term interest rates are expected to rise moderately. In 12 months, we expect the US bond to 10 years will return to 4%, a more targeted approach is therefore justified. . of balanced duration”.
Peripheral bonuses
On this side of the Atlantic, photography is different since the market offers discounts. two drops of 25 points each, up to 3.5% by the end of the year. In this case, the 10-year German bond is trading at 2.13%, continuing with recent weeks.
What has happened in recent days is that the premiums of peripheral countries have shrunk while that of France has increased, converging for the first time since 2008 with the Spanish risk premium.
