10-year US Treasury yield falls below 4%! US Treasuries lead global government bonds, while 30-year Chinese government bond futures hit a new historical high again
US Treasury yields fell, triggering a global rise in government bonds. Chinese government bond futures hit a historical high. The market expects the Federal Reserve to cut interest rates. US economic data is poor, with a significant increase in jobless claims. Powell stated that the economy is nearing a rate cut. Investors are optimistic about the rate cut
Vital Knowledge analyst Adam Crisafulli wrote: "The disappointing ISM data is just the latest sign of cooling domestic economic growth in the United States, and another sign that the Fed should have started an easing cycle yesterday, rather than waiting until September."
This optimism reached a fever pitch on Thursday, prompting traders to expect the Fed to cut interest rates by 25 basis points three times this year, with the remaining three Fed meetings this year all expected to result in rate cuts
The yield on the 10-year U.S. Treasury bond has fallen below 4% for the first time since February, leading to a seventh consecutive trading day of price increases for U.S. Treasury bonds. Bloomberg's U.S. Treasury Bond Index is set to achieve its longest streak of consecutive gains since the market turmoil at the beginning of 2020. The U.S. non-farm payroll data to be released later on Friday is seen as the next catalyst for this bond bull market. Analysts expect the report to show a slowdown in job and wage growth in July, highlighting the continued softness in the labor market.
Damien McColough, Fixed Income Research Director at Westpac Banking Corporation in Sydney, said: "The outlook for U.S. Treasury bonds is very positive, with momentum building this week. With the 10-year U.S. Treasury bond yield below 4%, the number of jobs may be a decisive factor in determining how long this rebound will last." McColough added that if the employment data suggests that market expectations for rate cuts are justified, the yield on the 10-year U.S. Treasury bond could fall to 3.8%.
On Thursday, the Bloomberg U.S. Treasury Bond Index closed at its highest level in two years. Eugene Leow, Senior Interest Rate Strategist at DBS Group Holdings Ltd in Singapore, said: "There is certainly growing concern that the Federal Reserve may have to adopt a faster adjustment path to lower interest rates. As worries about the labor market surface, the market may be focusing on asymmetric risks."