Treasuries Extend Rally, Traders Weigh Fed Speakers’ Scenarios
By Bloomberg News
Treasuries extended their November rally, with traders wading through remarks from a slew of Federal Reserve speakers and the latest economic readings for clues on the central bank’s next steps.
Just days ahead of the “blackout period” in which Fed officials don’t talk publicly, Governor Christopher Waller said the recent slowdown may indicate policy is tight enough to contain inflation that still remains too high. Absent any big shocks, Waller noted he’s confident the US can pull off a soft landing. Two-year US yields dropped below 4.8%. The S&P 500 pushed away from session lows.
The list of speakers also included Fed Bank of Chicago President Austan Goolsbee, who noted inflation is coming down, but it’s not yet back to target, and Governor Michelle Bowman, who said she expects to support additional tightening to return inflation to the central bank’s goal.
“It’s a busy day for Fedspeak,” said Will Compernolle, macro strategist at FHN Financial. “The real focus will be on how much Fed officials push back on markets’ growing confidence that the Fed has reached its terminal rate and that rate cuts are in the pipeline as early as the first half of next year.”
US consumer confidence rose for the first time in four months in November, aided by more optimistic views about the outlook for the labor market. Home prices hit a fresh record high, according to seasonally adjusted data from S&P CoreLogic Case-Shiller.
The drop in volatility has further widened the gap to rates volatility, which should normalize in 2024, according to a strategist from Goldman Sachs Group Inc. The recent sharp pullback in volatility as year-end approaches creates hedging opportunities given the cloudy outlook for equities.
S&P 500 is running out of steam and facing mixed futures flows, according to Citigroup Inc. strategist Chris Montagu. Hedge funds piled into bullish dollar bets despite the currency’s slide on softening US economic data and increasing expectations that the Fed’s most aggressive rate-hiking cycle in a generation is near an end.
Reddit Inc. is again holding talks with potential investors for an initial public offering for the social media company, according to people familiar with the matter. Adobe Inc.’s planned $20 billion purchase of design software maker Figma Inc. risks being blocked by Britain’s competition watchdog unless it offers up remedies to solve competition issues.
Bank of Nova Scotia missed fiscal fourth-quarter profit estimates as the company set aside more money than expected for potentially souring loans.
Fast-fashion retailer Shein has filed confidentially with US regulators for an initial public offering that could take place next year.
Key events this week:
New Zealand rate decision, Wednesday
OECD releases biannual economic outlook, Wednesday
Eurozone economic confidence, consumer confidence, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
US wholesale inventories, GDP, Wednesday
Cleveland Fed President Loretta Mester speaks, Wednesday
Fed releases its Beige Book, Wednesday
China non-manufacturing PMI, manufacturing PMI, Thursday
OPEC+ meeting, Thursday
Eurozone CPI, unemployment, Thursday
US personal income, PCE deflator, initial jobless claims, pending home sales, Thursday
China Caixin Manufacturing PMI, Friday
Eurozone S&P Global Manufacturing PMI, Friday
US construction spending, ISM Manufacturing, Friday
Fed Chair Jerome Powell to participate in “fireside chat” in Atlanta, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
– The S&P 500 rose 0.2%
– The Nasdaq 100 rose 0.1%
– The Dow Jones Industrial Average rose 0.3%
Currencies
– The Bloomberg Dollar Spot Index fell 0.3%
– The euro rose 0.3% to $1.0983
– The British pound rose 0.4% to $1.2682
Cryptocurrencies
– Bitcoin rose 1.5% to $37,598.31
– Ether rose 1.1% to $2,038.62
Bonds
– The yield on 10-year Treasuries declined three basis points to 4.36%
Commodities
– West Texas Intermediate crude rose 2.5% to $76.73 a barrel
– Spot gold rose 0.9% to $2,031.86 an ounce
This story was produced with the assistance of Bloomberg Automation.