Rates Spark: Geopolitics in focus ahead of US CPI
Everything hinges on two more US CPI readings US rates ended last week with a dovish aftertaste on the back of poor payroll numbers, but the CPI figure this week should be more instrumental. Until September’s Federal Reserve meeting, we only have two more CPI readings. And markets still need to make up their minds ...
The Federal Reserve is set to release two more Consumer Price Index (CPI) readings ahead of their September meeting, which will determine the next steps for interest rates. Currently, around 40% of a rate hike is priced into the market. A lower-than-expected CPI could help ease concerns of the Fed Chair Kevin Warsh turning the central bank too dovish, potentially benefiting longer rates.
However, real rates are the main driver of higher UST yields, as inflation expectations are quite low. Bund yields appear safe from geopolitical risks, but they do not provide a strong hedge against risks. Gilt yields are also high, but trading them is difficult due to oil volatility.
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