Home Markets Bond yields fall after news of lower inflation expectations

Bond yields fall after news of lower inflation expectations

by SuperiorInvest

The New York Fed’s Consumer Expectations Survey showed that in August, Americans expected inflation a year ahead to be 5.7%. That’s down from 6.2% in July and the lowest since October 2021.

On the data front, investors will be watching the release of US annual and core inflation and the August month-on-month inflation rate.

Markets are pricing in a 9-in-10 chance that the Federal Reserve will raise interest rates by 75 basis points for the third time next week, but bond markets are essentially signaling that markets believe the inflation trajectory is headed lower.

The prices of energy, used cars and even food went down slightly. But there is a key difference between inflation in goods and in services, Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management, told CNBC.Capital connection” on Tuesday.

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“(Decreasing) goods inflation will reduce that inflation, but what we really need to look for in the numbers are two things: one is the median CPI (consumer price index) and the other is the core CPI. Because this services inflation — rents that are still going up , wages are still higher is what will determine the key thing we’re all watching to keep that risk: when and what makes the Fed pivot,” Ruiz said. .

However, the wealth management firm sees general economic sentiment continuing to decline, forecasting a mild recession in the US and a decline in GDP growth of 0.8% in 2023.

For a rate hike: “Our view is 75, 50, then 25 (basis points),” Ruiz added. “We don’t expect cuts next year, the key question is what will make them turn around.”

Meanwhile, Credit Suisse sees the Federal Reserve to stop rate hikes earlier than expected because of falling inflation that could spark a market recovery, the bank’s chief U.S. equity strategist told CNBC on Monday.

“That’s actually what’s being widely reported in the market,” Jonathan Golub said. “Every one of us sees when we go to the gas station that the price of gas is going down and the oil is going down. We’re even seeing it with food. So it’s really showing up in the data. And that’s a really big positive potential.”

Oil inventory data, the IBD/TIPP Economic Optimism Index, which measures monthly consumer confidence, the monthly budget statement and 30-year bond auctions are also available on Tuesday.

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