Ten-year bond yields set for biggest monthly drop since 2008
interest-rate cuts could be just months away.
The benchmark 10-year note yield has fallen by 60 basis points in November, as prices have soared, logging its biggest one-month drop since a 70-bps fall in December 2008, when the Federal Reserve slashed interest rates in response to a struggling economy and a distressed financial system.
Yields were last up 1 bp at 4.28% in European trading.
The U.S. economy has shown far more resilience than most expected — creating more jobs, maintaining spending and activity and all during 17 months of almost non-stop rate rises from the central bank to lower inflation.
Consumer price pressure are abating fast, spending is holding up and there has been enough evidence in the data to suggest the economy is heading for a gentle slowdown rather than recession.
In the space of a month, markets have shifted from an expectation for rates to fall by around 60 bps in the second half of the year to pricing a scenario in which the Fed will cut rates by a full percentage point by this time next year, with the possibility of the first drop as early as March.
«When it comes to market pricing, a Q1 rate cut has gone from being a complete out-of-consensus view only a month ago, to a serious proposition now.
It will be fascinating to see what Mr Powell makes of all this tomorrow,» Deutsche Bank strategist Jim Reid said.
Fed Chair Jerome Powell takes part in a discussion on Friday at Spelman College in Atlanta.
Traders will scour his remarks for any hint that the rally in bonds could be justified.
Shorter-dated yields have also dropped in November, but by far less. Yields on the two-year note, typically the most sensitive to shifts in investor thinking about the policy outlook, have fallen by 42
