Bonds drop as traders ease expectations for rate cuts

investmentnews.com:

Global bonds dropped and stocks posted mostly small moves as traders pared their expectations for interest-rate cuts in the face of resilient readings on the US economy.

The 10-year Treasury yield climbed closer to the key 4.5% level that some investors view as a threshold for an advance toward last year’s highs. Interest-rate swaps imply around 60 basis points of US monetary easing this year, making two cuts the most likely outcome. On Friday, the chance of a third cut was still above 50%.

For investors, it’s a busy week that includes US inflation data, a European Central Bank rate decision and the start of first-quarter earnings. Friday’s US jobs numbers exceeded expectations for a fifth straight month, reinforcing the Fed’s view of being patient about reducing rates. The next key moment for markets is Wednesday’s US consumer-price figures, projected to show further evidence of gradual cooling.

“There are indeed risks, and seeing the 10-year Treasury yield sustainably surpass 5% would indicate markets pricing in more likelihood of a hike,” Madison Faller, global investment strategist at JPMorgan Private Bank, said on Bloomberg Television. “However, as long as investors perceive a rate cut as the next move, they should be able to navigate this transition.”

S&P 500 and Nasdaq 100 futures contracts were steady following a strong close on Wall Street Friday, spurred by the latest blockbuster US labor-market figures. Mining stocks led gains in Europe after a rebound in iron ore prices, with the regional Stoxx 600 Index edging higher. 

Tesla Inc. rallied as much as 4.2% in US premarket trading, set to trim some of its 34% year-to-date slump. Tesla will unveil its new robotaxi on Aug. 8, Chief Executive Officer Elon Musk said