Red was the order of the day on Tuesday's bond markets, and in particular, the yield on ten-year US Treasuries rose sharply, by +12.7 basis points, from 3.95% to 4.0770%, despite the poor Empire State index (New York Fed) published at 2:30 pm.

Clearly, doubts are re-emerging as to the imminence of an FED rate cut in the 2nd decade of March: the consensus, which was over 2/3 before the long weekend (Monday was a bank holiday), is beginning to crack.
The best proof of this is that the day's poor figures have at no point halted the deterioration in US Treasuries, with the 2-year yield jumping +11pts from 4.138% to 4.248%, against 4.25% at the end of 2023.

The 30-year yield jumps +10pts to 4.312%, against 3.945% on 12/27, i.e. +37pts in 15 days.
Let's take a closer look at the 'Empire State' manufacturing activity index for the New York region: it continued to contract sharply in January, rising from -14.5 to -43.7, its lowest level since May 2020.
What a cold shower: economists were, on the contrary, forecasting a rise in this indicator to around -5.
The new orders sub-index deteriorated to -49.4, from -11.3 in December, while the component measuring the number of hours worked deteriorated to -6.1, from -2.4 in December, highlighting a weakening labor market.

In Europe, the ZEW index of German investor sentiment edged up by +2.4pts to 15.2 points, compared with December 2023... but Germany continues to suffer from freeway and city-center blockades (farmers and truckers opposed to the abolition of fuel rebates).

Bunds and OAT yields also turned upwards during the session: our OATs are up +3pts to 2.75%, Bunds are up +5pts to 2.248%, Italian BTPs are down +6pts to 3.843%.

British Gilts show an identical spread at 38590%... and Spanish Bonos fare best in Europe with +3Pts to 3.192%, inflation having contracted to 5.2% by the end of 2023 thanks to energy prices.

Copyright (c) 2024 CercleFinance.com. All rights reserved.