Bloomberg 12/2/24
Rates traders are heeding the message from Fed Governor Christopher Waller and have boosted the expected probability of a quarter-point rate cut this month to around 68%, from 59% at the end of last week. What’s more, the outlook for three reductions over the next year on a cumulative basis has once again firmed up.
Image
Remember that Waller has been regarded as an important bellwether for the central bank since late November last year, when he indicated a shift in his usually-hawkish stance to a more dovish one. That change kicked off a wave of bets that the Fed’s next move would be to lower borrowing costs, which were proven prescient.

( BBG) 12/06 13:30 *US NOV. UNEMPLOYMENT RATE 4.2%; EST. 4.1%

Bloomberg 12/2/24
Federal Reserve Governor Christopher Waller said he’s inclined to vote for another reduction in interest rates when officials meet later this month, though data due before then could make the case for holding them steady.
“At present I lean toward supporting a cut to the policy rate at our December meeting,” Waller said in prepared remarks at a conference on the Fed’s framework review in Washington sponsored by the American Institute for Economic Research. “But that decision will depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation.”
Waller said recent data had raised concerns that inflation may be stalling above the 2% target but added “there is no indication” that prices in key service categories should remain at their current levels or increase.
“I believe the evidence is strong that policy continues to be significantly restrictive and that cutting again will only mean that we aren’t pressing on the brake pedal quite as hard,” Waller said in the text of his remarks. “Another factor that supports a further rate cut is that the labor market appears to finally be in balance, and we should aim to keep it that way.”

Bloomberg 12/6/24
US Treasuries rallied and traders boosted
their bets on a Federal Reserve interest-rate reduction this
month after a mixed November employment report.
Yields on two-year notes, which are most sensitive to the
central bank’s policy, slid four basis points on 4.10% on Friday
after data showed both nonfarm payrolls and the unemployment
rate increased last month. Traders are pricing in about 21 basis
points worth of easing at the Fed’s December meeting, from about
16 basis points before the data.

Bloomberg 11/13/24
Traders have grown more certain of a quarter-point Fed rate cut in December after inflation data came in line with economist estimates. They’re now pricing more than a 60% chance of a reduction next month, from a 50-50 probability seen on Tuesday.

Wall Street Journal 11/15/24
A Federal Reserve official said the central bank
could eventually need to slow down the pace at which it is lowering rates and
said it was too soon to say whether that should happen at the central bank's
meeting next month.

Another rate cut in December is "certainly on the table, but it's not a done
deal," said Boston Fed President Susan Collins in an interview Thursday.
"There's more data that we will see between now and December, and we'll have
to continue to weigh what makes sense."

The Fed's next meeting is Dec. 17-18. Officials will see data on inflation and
employment for November before that meeting.

Bloomberg 11/25/24
US Treasuries have added to the gains spurred by the late-Friday announcement of Scott Bessent — a Wall Street veteran who investors expect will take the sting out of the administration’s more aggressive trade and economic policy proposals — as President-elect Donald Trump’s Treasury secretary choice.
Monday’s rally trimmed yields by more than 10 basis points across five- to 30-year maturities, gaining momentum in New York trading amid a drop in oil. The dollar slumped by the most in more than two weeks before paring the loss.
“Bessent is viewed as a potentially moderating influence on the incoming administration’s policies,” said Shaun Osborne, chief foreign-exchange strategist at Scotiabank. “Favoring gradualism on tariffs, for example.”

Bessent, who runs macro hedge fund Key Square Group, has called for a gradual approach to implementing trade restrictions and has appeared open to negotiating the exact size of tariffs championed by the president-elect. In an interview with the Wall Street Journal, Bessent said his priority will be to deliver on Trump’s various tax cut pledges, while also cutting spending and “maintaining the status of the dollar as the world’s reserve currency.”

Bloomberg 11/21/24
Bank of Japan Governor Kazuo Ueda gave the
clearest hint yet that the central bank’s next monetary policy
meeting will involve a live discussion over whether to raise
interest rates.
“It’s impossible to predict the outcome of the meeting at
this point,” Ueda said in response to questions at a Europlace
forum in Tokyo on Thursday. “The next meeting is December, but
there’s still a month to go. The vast amount of data and
information will become available between now and then.”

Bloomberg 11/12/24
Germany’s new finance minister dismissed fears the political turmoil in Berlin will trigger a funding freeze, pledging the federal government will be fully capable of functioning in the weeks before February’s early election.
Joerg Kukies, appointed last week after Chancellor Olaf Scholz fired his predecessor and brought a premature end to the ruling coalition, said it’s still unclear whether Scholz’s minority government can get a supplementary budget for this year and the 2025 finance plan approved in parliament.
To do so, they’ll need the votes of opposition lawmakers. Friedrich Merz, the leader of the center-right CDU/CSU alliance, signaled earlier Tuesday the group may be willing to cooperate on this year’s budget, but Kukies said the situation remained very much in flux.
He conceded that it’s “not realistic” that the 2025 budget will get approval by the end of the year, meaning the government will be forced to resort to a temporary finance planning process to keep funds flowing.
While it’s not an ideal state of affairs and some new projects may face delays, Kukies said it’s not technically problematic and has happened multiple times before, including earlier this year after a constitutional court ruling upended the government’s finances.
The government “can and will fulfill all of its commitments,” he told delegates at a Sueddeutsche Zeitung forum in Berlin. He’s due to attend a meeting of the Bundestag’s budget committee on Wednesday.

New York Times 11/15/24
A strong economy is giving Federal Reserve officials room to move “carefully” as they lower interest rates, the central bank chair said.
Jerome H. Powell, the chair of the Federal Reserve, said that a solid economy with low unemployment, robust consumer spending and strengthening business investment gives the central bank room to take its time in cutting interest rates.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Mr. Powell said in a speech prepared for delivery in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
The Fed’s policy-setting committee meets next in mid-December, and while policymakers are expected to lower rates by a quarter point at that gathering, Fed officials themselves have made it clear that a reduction is not guaranteed.
Mr. Powell did not address December specifically in his prepared remarks. But officials have made it clear that they will be watching incoming data points — including inflation and jobs figures — as they decide what to do.
“The path for getting there is not preset,” Mr. Powell said on Thursday. “In considering additional adjustments to the target range for the federal funds rate, we will carefully assess incoming data, the evolving outlook, and the balance of risks.”

Fed cuts rates by 0.25%, Powell deflects questions about Trump policies
By Alex Steger
Citywire 11/7/24
Powell was asked about the impact of the next administration’s policies on inflation and the economy but said that these would not play into the Fed’s immediate decisions.
‘Let me say in the near-term, the election will have no effects on our policy decisions. As you know, many, many things affect the economy and anyone who writes down forecasts in their job will tell you that the economy is quite difficult to forecast looking out past the very near term,’ he said.
‘Here, we don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy would be. Specifically, whether and to what extent those policies would matter for the achievement of our goal variables, maximum employment, and price stability. We don’t guess, we don’t speculate, and we don’t assume.’

Bloomberg 11/25/24
US Treasuries have added to the gains spurred by the late-Friday announcement of Scott Bessent — a Wall Street veteran who investors expect will take the sting out of the administration’s more aggressive trade and economic policy proposals — as President-elect Donald Trump’s Treasury secretary choice.
Monday’s rally trimmed yields by more than 10 basis points across five- to 30-year maturities, gaining momentum in New York trading amid a drop in oil. The dollar slumped by the most in more than two weeks before paring the loss.
“Bessent is viewed as a potentially moderating influence on the incoming administration’s policies,” said Shaun Osborne, chief foreign-exchange strategist at Scotiabank. “Favoring gradualism on tariffs, for example.”
ImageBessent, who runs macro hedge fund Key Square Group, has called for a gradual approach to implementing trade restrictions and has appeared open to negotiating the exact size of tariffs championed by the president-elect. In an interview with the Wall Street Journal, Bessent said his priority will be to deliver on Trump’s various tax cut pledges, while also cutting spending and “maintaining the status of the dollar as the world’s reserve currency.”

*FED LOWERS BENCHMARK RATE 25 BPS TO 4.5%-4.75% RANGE
*Powell: Fed Is Not on Pre-Set Course, Will Continue To Make Decisions Meeting-By-Meeting
*Fed's Powell: We're On a Path To More Neutral Stance, Must See Where Data Lead Us

US election will have no near-term effect on Fed policy: Powell
Nov. 7 (AFP) -- The US presidential election outcome will have "no effects" on central bank policy decisions in the near-term, Federal Reserve Chair Jerome Powell told reporters Thursday, after Republican Donald Trump's victory at the polls.
"We don't know what the timing and substance of any policy changes will be. We therefore don't know what the effects on the economy would be," he added after the Fed unveiled its rate decision. "We don't guess, we don't speculate, and we don't assume."
da-bys/acb

Stocks Near Highs as Powell Gives ‘No Skip Signs’: Markets Wrap
Fed cuts rates for second-straight meeting to support economy
Policymakers change language around job market, inflation
By Rita Nazareth
(Bloomberg) -- Stocks hit fresh all-time highs, Treasury yields fell and the dollar dropped the most since August, with Jerome Powell saying that even after Thursday’s rate cut, policy is still restrictive.
The S&P 500 was up 0.8%. Treasury 10-year yields declined 10 basis points to 4.34%. The Bloomberg Dollar Spot Index fell 0.6%. The Fed Chair said he doesn’t rule “out or in” a December rate cut. He said recent indicators suggest the economy keeps expanding solidly. While inflation expectations remain anchored, core prices remain somewhat elevated, he said. Powell added that in the near term, the election will have no effect on policy.

Bloomberg 11/25/24
US Treasuries have added to the gains spurred by the late-Friday announcement of Scott Bessent — a Wall Street veteran who investors expect will take the sting out of the administration’s more aggressive trade and economic policy proposals — as President-elect Donald Trump’s Treasury secretary choice.
Monday’s rally trimmed yields by more than 10 basis points across five- to 30-year maturities, gaining momentum in New York trading amid a drop in oil. The dollar slumped by the most in more than two weeks before paring the loss.
“Bessent is viewed as a potentially moderating influence on the incoming administration’s policies,” said Shaun Osborne, chief foreign-exchange strategist at Scotiabank. “Favoring gradualism on tariffs, for example.”
ImageBessent, who runs macro hedge fund Key Square Group, has called for a gradual approach to implementing trade restrictions and has appeared open to negotiating the exact size of tariffs championed by the president-elect. In an interview with the Wall Street Journal, Bessent said his priority will be to deliver on Trump’s various tax cut pledges, while also cutting spending and “maintaining the status of the dollar as the world’s reserve currency.”

Bloomberg 11/7/24
The Bank of England cut borrowing costs for
the second time this year but stopped short of signalling faster
easing, warning that the budget will drive up inflation by as
much as half a percentage point.
Eight members of the Monetary Policy Committee led by
Governor Andrew Bailey voted to lower the benchmark interest
rate by a quarter point to 4.75%. Catherine Mann, one of its
external officials, was the lone dissenter, preferring to hold
at 5%. The outcome was widely anticipated by economists.
“We need to make sure inflation stays close to target, so
we can’t cut interest rates too quickly or by too much,” Bailey
said in a statement on Thursday in London. “But if the economy
evolves as we expect, it’s likely that interest rates will
continue to fall gradually from here.”

Bloomberg 11/5/24
Australia’s central bank held its key
interest rate at a 13-year high on Tuesday, aiming to keep up
the pressure on stubbornly sticky inflation while joining much
of the world in waiting for the outcome of US elections.
As expected, the Reserve Bank left its cash rate at 4.35%,
marking a year at that level, and restated that it isn’t “ruling
anything in or out” on policy. The RBA’s board highlighted the
“high level of uncertainty” about the international outlook.
Underlying inflation “remains too high,” the rate-setting
board said in a statement. “It will be some time yet before
inflation is sustainably in the target range and approaching the
midpoint. This reinforces the need to remain vigilant to upside
risks to inflation and the board is not ruling anything in or
out.”

Bloomberg 11/1/24
Treasury futures push to session highs in a bull-steepening move after October payrolls change fell short of median estimate with September change revised lower. The two-month net revision subtracted a total of 112k jobs.
On the day Treasury yields flip to richer by up to 7bp across front-end of the curve, which leads gains, steepening 2s10s spread by 3.5bp on the day
Fed-dated OIS prices in a combined 45bp of rate cuts over the remaining two meetings this year vs 42bp at Thursday’s close

TOKYO, Reuters 10/31/24
The Bank of Japan maintained ultra-low interest rates on Thursday but said risks around the U.S. economy were somewhat subsiding, signaling that conditions are falling into place to raise interest rates again.
The central bank also projected inflation would move around its 2% target in the coming years, stressing its resolve to keep raising borrowing costs if the economy sustains a moderate recovery.
"Looking at domestic data, wages and prices are moving in line with our forecasts. As for downside risks to the U.S. and overseas economies, we're seeing clouds clear a bit," Governor Kazuo Ueda told a news conference.
Ueda's remarks were less dovish than those made before Thursday's meeting that the BOJ can "afford to spend time" scrutinizing the fallout from risks such as U.S. economic uncertainties and volatile financial markets.
The dollar briefly fell to 151.92 yen from levels above 153 yen after Ueda's remarks, which were interpreted as heightening the chance of a rate hike in December.

Wall Street Journal 11/7/24
Asked about whether the Federal Reserve is considering a pause in rate cuts in December, Chair Jerome Powell said officials haven't made any decisions yet as they move the stance of monetary policy down to a more neutral level.
(Benzinga Newswire)Fed Chair Powell Says We Would Be Concerned If We Thought Long-term Inflation Expectations Are Anchoring Higher; That's Not What We See; Overall Inflation Expectations Are Consistent With 2% Inflation;

South China Morning Post 10/25/24
China's top legislature will convene a meeting from November 4-8 to discuss a
wide range of issues facing the world's second-largest economy.

The date was announced at a Friday meeting chaired by Zhao Leji, chairman of
the Standing Committee of the National People's Congress.

The upcoming meeting of the NPC Standing Committee arrives at a time when a
new US president will be elected on November 5 and as new China policy looks
to pose a fresh test to Chinese trade, tech and economy.

The meeting had been widely expected to be held at the end of this month.

Bloomberg *POWELL: IN NEAR TERM, ELECTION WILL HAVE NO EFFECT ON POLIC

Bloomberg 10/23/24
Traders are adding to wagers that the
European Central Bank will lower interest rates by half a
percentage point in December to a bid to prop up the bloc’s
flagging economy.
Swaps imply a 45% chance of a reduction of that size at the
final ECB meeting of the year, with 25 basis-point cuts priced
at every gathering through to June. Before last week’s decision
to cut, markets only envisaged a quarter-point move in December.
The repricing picked up after Reuters reported Wednesday
that the central bank is starting to debate whether interest
rates should be cut below neutral, to a point at which they’re
stimulating the economy. Inflation is already below the 2%
target and former powerhouse Germany is in recession.

MT Newswires 11/7/24
The Federal Reserve's monetary policy committee on Thursday reduced its benchmark lending rate by 25 basis points, following a 50-basis-point cut in September.

The Federal Open Market Committee reduced interest rates to a range of 4.50% to 4.75% from 4.75% to 5%, in line with a Bloomberg-compiled consensus.

"Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low," the FOMC said in a Thursday statement after its two-day meeting. Although inflation has made progress toward policymakers' 2% target, it remains "somewhat elevated," according to the statement.

Official data last month showed that US consumer inflation rose at a more-than-expected pace in September both sequentially and annually. Bureau of Labor Statistics data showed earlier this month that US job creation fell well short of Wall Street's estimates in October amid a Boeing (BA) strike and potential hurricane-related disruptions. The strike that lasted for more than seven weeks ended earlier this week.

"The committee judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said Thursday. "In considering additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks," the FOMC said, reiterating its remarks from September.

Bloomberg 10/17/24
The European Central Bank lowered interest rates for the third time this year as a hastier retreat in inflation allows it to offer support to the region’s stuttering economy.
The key deposit rate was cut by a quarter-point to 3.25% — as predicted by all analysts in a Bloomberg survey. The ECB said the process of taming prices is “well on track” but didn’t offer any clues on when or how quickly borrowing costs will be reduced from here.
The ECB “will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim,” it said in a statement. “The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction.”

Bloomberg 10/23/24
The front end of the Canadian curve outperforms after Bank of Canada cut interest rates 50bp to 3.75%, in line with estimate. Leading into the decision, the Bank of Canada OIS market was pricing in around 45bp of rate cuts, or roughly 90% chance of a half-point move.
Canada 2-year yields drop back below 3%, trade richer by around 3.5bp on the day in the aftermath of the decision and outperform on the curve — 2s10s Canada spread rises to session wides and trades higher by almost 4bp on the day
Canada 10-year yields drop back to near unchanged on the day, trading around 3.235%