ile stocks continue to hit new highs, the worldwide sell-off in long-term government bonds is gathering pace. Rates actually rose more in nearly every G10 country than they did in the US last week, which certainly contributed to dollar weakness.
Investors spent Wednesday betting that the Federal Reserve (Fed) would not only cut rates by 25bp in September but could even deliver a jumbo rate cut, after CPI data released the day before came in softer than analysts expected. Fed doves now see a huge opportunity for the central bank to focus on the slowing jobs market rather than tariff-led inflation risks that have yet to materialise.
Thursday likely sees US PPI core inflation back up to 3%, while core CPI inflation was confirmed earlier this week at 3.1%. In all probability these inflation rates will be on the rise in the coming months, and can easily touch 4%. We see, for example, how proposed eSLR changes are good for Treasuries. But Treasuries can't fully ignore evolving inflation data
