US inflation makes case for (small) September rate cut
Recent US Consumer Price Index (CPI) inflation data brought good news for investors and central banks.
Insights Topic
US
A couple of non-recessionary surveys
With US economic data driving very large moves in the last few days, we think it is worth highlighting two data releases that were published yesterday. The Institute of Supply Management (ISM) Services and the Senior Loan Officer Survey spoke of an economy that is stronger than some of the recent price action might suggest.
Labour market dents soft landing sentiment
If you were on vacation last week, your holiday blues wouldn’t have been helped when you looked at your screens this morning, given how quickly sentiment has changed, mainly on the back of one data point.
Politics won’t trump data for the Fed
The last few weeks have seen former President Donald Trump establish a lead over current President Joe Biden across polls in the run-up to November’s US election. Even though it is early days and a lot can change before November (including the Democrat candidate), it is worth considering what a second Trump term might mean for the world economy and for fixed income markets.
Labour market cooling justifies Fed’s dovish lean
One of the drivers of the dovish pivot from the Federal Reserve (Fed) in December was the acknowledgement that the risks to the policy outlook had become more two-sided. In other words, while higher rates were still needed to tame inflation, the Fed saw a risk that staying restrictive for too long and risk damaging a labour market that has so far shown remarkable resilience.
CPI and FOMC post mortem
Consumer Price Index (CPI) inflation as an entrée was well received by the diners, prompting a 15 basis points (bps) rally in the 10-year Treasury. The main course though, was met with some adverse critiques as the Federal Open Market Committee (FOMC) delivered a slightly more hawkish dot plot than expected.
US default landscape revisited
From a US high yield (HY) perspective, the month of May turned out to be one of note – for the first time since December 2022, no US HY defaults were recorded, with not one instance of a bankruptcy filing or a missed interest/principal payment.
ECB wage data - can I get a raise?
The European Central Bank (ECB) will almost certainly start their rates cutting cycle next month. Supportive inflation data and clear guidance from the governing council has driven market implied probabilities of a June cut to almost 100%, with little in the way to derail that.
Not much change at the Fed – so, what now?
The Federal Open Market Committee (FOMC) meeting was a relatively uneventful one, but there are a few points worth highlighting.
Don't forget about money supply measures M1 and M2
Money supply measures such as M1 and M2 enjoyed a relatively brief period of fame and glory just after the pandemic.
Health of US small business: an indicator for the US economy
The NFIB (National Federation of Independent Business) survey can most certainly be considered an important report that monitors the pulse of the US economy.
Maturity wall: what maturity wall?
We saw a great disparity among strategists in terms of default-rate projections for this year. With the cost for corporates to refinance their debt considerably higher than we saw in 2020 and 2021, and an elevated volume of upcoming maturities, many market participants predicted a default rate markedly higher than what we have seen so far.