The dismal data heralded a recession, prompting a sharp drop in U.S. bond yields on Friday (22nd), lowering investors’ expectations for a more aggressive rate hike by the Federal Reserve.
Financial data provider S&P Global announced on Friday that the U.S. July Composite Purchasing Managers’ Index (PMI) fell to 47.5, a 26-month low, and fell below 50, the dividing line between prosperity and decline.
After the data was published,10-Year U.S. Treasury YieldIt fell sharply below 2.8% on Friday, and the 30-year U.S. Treasury yield fell below 3.00%, the lowest since May, and U.S. stocks were also dragged down.
In addition to PMI, this week’s series of economic data almost all heralded a recession, reducing market expectations for aggressive rate hikes by the Federal Reserve.
The United States announced on Thursday (21st) that the number of initial claims for unemployment benefits reported last week at 251,000, higher than market expectations, revealing a wave of layoffs in interest-rate-sensitive real estate and manufacturing, prompting a cooling labor market. The Philadelphia Manufacturing Index’s outlook for business conditions fell to -12.3, well below the forecast of 0.8 and the lowest since 1979. U.S. housing starts fell to 1.559 million in June, the lowest level since September last year. These data highlight the trend of the U.S. economy entering a slowdown.
Traders forecast a 9 percent chance of a 4-yard rate hike at next week’s Federal Open Market Committee (FOMC) meeting, while the odds of a 2-yard rate hike in September have soared, and the odds of a 3-yard rate hike decreased, CME’s FedWatch tool showed on Friday. to 33%.
Markets expect the final federal funds rate to rise to a range of 3.25%-3.50% in December 2022, before the Fed will start cutting rates in 2023.
Gregory Faranello, head of U.S. rates trading and strategy at AmeriVet Securities, said the U.S. economy is undeniably decelerating, and the Fed is likely to start reducing rate hikes following it decides to raise rates by 3 yards at its meeting next week.
In a volatile market environment, Jerome Schneider, head of short-term portfolio management, judged that the right thing for the market to do now is to have a higher cash level.
