Us Bond Yields Firm

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Us Bond Yields Firm

Us Bond Yields Firm As Oversized Rate Cut Hope Fades

US bond yields are firm on Tuesday as the chances of a bigger rate cut by the US Fed have reached new lows. Now, the odds of a 50 bps rate cut are almost zero as the Fed will return to more normal (0.25%) rate cuts.

The Fed officials are pretty confident about the inflation situation. In fact, many are even talking about taking a cautious stance on any more rate cuts.

Labor Market Faces Upside Risks

Meanwhile, there's still a lot of concern about the condition of the US labor market. According to the Fed, there are valid risks which means they can't miss out on more rate cuts at this stage.

However, as far as inflation is concerned, the Federal Reserve is pretty confident that it will move towards the 2% target.

On Monday, Fed Kashkari defended the previous 50 bps rate cut. He added that the interest rate in the USA will be 4.4% by the end of 2024.

Similarly, Fed Bostic also had similar views but made it clear that they will not be cutting rates by 50 bps again. According to him, the labor market is now facing increased risks but the unemployment rate will likely stay the same.

Similarly, Fed Austan Goolsbee hinted that they will be delivering more rate cuts in the year 2025 as well. As for the unemployment rate, he added that it is at the right levels and shows full employment.

According to experts, the Flash PMIs for September show a rather mixed view of the US economy. The manufacturing index is especially at record lows, as such levels were only seen during June 2023.

Overall, the US Dollar and the US bond yields are very firm, which is a good thing. After all, we are very close to yet another rate cut, and a stronger US Dollar at this stage is truly something to think about.

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