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2 weeks ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder |Michiel Tukker
US remain rates under upward pressure with the Moody’s downgrade probing 10y US Treasury yields beyond 4.5% again. The widening of Treasury yields versus SOFR swaps and the even more pronounced widening versus Bunds – in the 10y from 184bp to up to 193bp – underscore the domestic nature of the driver. The downgrade last week turned the spotlight back on US fiscal dynamics and the question whether there is any serious intent by politicians to rein in the deficit.
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3 weeks ago | 
think.ing.com | Padhraic Garvey
Support for entire curve coming from both ends - a fixed versus float analysis We explain further below why we think the Bank of Korea (BoK) will cut its key rate to 2% (now 2.75%) by year-end. It should hold there for 2026, and beyond that, we'd identify a neutral leaning for the key rate at around 2.5%. That’s premised on a tendency for inflation to average at or about 2% in the past 15 years, and inputs a modest real rate of around 0.5% on top of that.
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3 weeks ago | 
think.ing.com | Padhraic Garvey
Commercial paper rates still elevated versus the Fed's reverse repo rate
Term in commercial paper - still quite tame
Bank reserves are ample, party on debt ceiling complications
Inflows into money market funds have stalled since 'Liberation Day', particularly for institutions, which have seen moderate falls.
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3 weeks ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder
The break lower in the Treasury 10yr yield (back below 4.5%) makes a degree of sense in light of the PPI (lower than expected) and retail sales (weaker than expected) data. The question is what’s next? Is the dip in PPI inflation the beginning of a trend? Probably not, given the tariff effects to come. And retail sales? Less certain, but probably weaker. Industrial production was also on the weak side. Overall these April data are calming, and Treasuries indeed liked these data.
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3 weeks ago | 
think.ing.com | Benjamin Schroeder |Michiel Tukker |Padhraic Garvey
US 10yr breaks above 4.5% again Since the weekend agreement with China, we've turned bearish on Treasuries, as the recession risk has been downsized, and there's been a risk-on tone in the risk asset space. Also, we note that mutual funds had been setting short duration strategies over previous weeks, which had not shown up in prior yield movements. So an up-move in yields was overdue.
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3 weeks ago | 
think.ing.com | Michiel Tukker |Padhraic Garvey
US Treasuries under rising yield pressure Despite the tariff roller-coaster of the past six weeks, we’ve ultimately landed in a place where the prior macro worries have now been materially lowered. Given that, we latch back on to an elevated inflation / fiscal deficit combination that can worry Treasuries and mute rate-cut expectations.
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1 month ago | 
think.ing.com | Padhraic Garvey |Michiel Tukker
The Bank of England made its cut, as was already widely expected, but the communication did not offer the dovish flavour markets were looking for. Sterling rates had turned more dovish in the wake of 'Liberation Day' and followed US rates lower. The script of the Bank, however, did not move away from its “gradual and careful” approach and the baseline therefore remains cuts at a quarterly pace. Markets still price in a 25% rate cut at the June meeting, but we think the next cut will have to wait.
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1 month ago | 
think.ing.com | James Knightley |Padhraic Garvey |Francesco Pesole
Fed leaves rates unchanged, but highlights elevated uncertainty The Federal Reserve has left monetary policy unchanged with the Fed funds target rate range remaining at 4.25-4.50%. It was a unanimous decision with the accompanying press release stating that the economy continues to "expand at a solid pace", labour market conditions remain "solid" while inflation "remains somewhat elevated". All this phraseology is the same as last time.
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1 month ago | 
think.ing.com | Michiel Tukker |Benjamin Schroeder |Padhraic Garvey
A move lower in US rates could overprice the number of Bank of England cuts We think the Bank of England will cut the policy rate by 25bp, and so do markets, with a full cut already priced in. Markets see the chance for a consecutive cut in June at around 50%, but here we disagree. Instead, our economists still sees the BoE sticking to a gradual easing of one cut per quarter. The sharper pricing of markets is mainly a spillover from the global unrest since Trump’s tariff’s announcements.
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1 month ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder
We saw a decent US 10yr auction. It (effectively) came through secondary levels by over a basis point. The indirect bid (external official sector driven) at 71.2% was down from last time but still decent. Direct bidders (domestic real money driven) was up to almost 20%. Overall there was less need for dealers to take up the slack, and the consequential cover at 2.6 times was decent.
