By Molly Schwartz, cross-asset macro strategist at Rabobank
10-year Treasury yields slid lower over yesterday’s session, retracing more than 9bps from Wednesday’s post-FOMC high of 5.02, with much of the move seemingly driven by falling oil prices, as Brent crude oil sank $3.5 to intraday lows below $102/bbl before retracing to $104/bbl. The UST yield curve has continued flattening, albeit in a bull-flattening fashion, as 2-year yields were dragged lower by almost 7bp. Given recent US economic data suggestive of a stronger-than-previously-thought labor market and hotter-than-preferred inflation, we maintain that the risk to our FOMC view of continued holds through year-end is skewed in favor of one hike this year, but believe that market-implied pricing of between one and two additional hikes in 2027 is unlikely (Read more about our FOMC view from Rabobank’s Fed whisperer, Philip Marey, Presidential Memorandum to “identify and take steps in response to Canada’s measures that have denied US firms access to Canada’s federal and provincial procurement markets.” This comes as Canadian PM: It should be noted that good manners have never been proven to be an effective strategy for retaining sovereignty. Carney also clarified that Canada is not seeking to become a “full member” of the European Union, while Canada’s EU ambassador-designate, Jonathan Wilkinson, asserted that Canada wants to “get as close as [it] possibly can to the EU without giving up significant chunks of sovereignty.” Speaking of non-EU members, the Bank of England announced its decision to hold Bank Rate unchanged at 3.75% in a 6-3 vote. Rabobank’s BoE whisperer, Stefan Koopman, highlights in a Bank of England Comment that there is a case for the Bank to tighten borrowing conditions further, suggesting that November is a live meeting. Rabobank is forecasting a 25bp hike at the November meeting, assuming that the Autumn Budget is well absorbed. (Read more
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