US Treasury yields plummet as inflation surprises, Fed dovish bets grow
-
US
10-year
Treasury
yield
drops
to
4.214%
following
unexpected
-0.1%
MoM
contraction
in
June
CPI. -
Core
CPI
increases
by
just
0.1%
MoM,
bolstering
predictions
for
Fed
rate
cuts
beginning
September
2024. -
Gold
exceeds
$2,400
and
Silver
ascends
past
$31.00
as
traders
forecast
49
bps
of
easing
by
December
2024.
US
Treasury
bond
yields
tanked
on
Thursday
after
the
US
Bureau
of
Labor
Statistics
(BLS)
revealed
a
surprise
fall
in
inflation
before
Wall
Street
opened.
This
reinforced
speculation
that
the
Federal
Reserve
could
start
lowering
interest
rates
in
2024,
and
according
to
data,
traders
target
September
as
the
first
cut.
US
CPI
drop
boosts
Gold
and
Silver
prices
amid
strengthening
rate
cut
bets
The
Consumer
Price
Index
(CPI)
for
June
contracted
by
-0.1%
Month
over
Month,
below
estimates
of
a
0.1%
increase.
Underlying
inflation,
as
measured
by
Core
CPI,
rose
by
0.1%
Month
over
Month,
also
beneath
the
consensus
and
May’s
data.
Annual
readings
were
also
lower,
as
CPI
fell
from
3.3%
to
3%,
while
core
inflation
dipped
from
3.4%
to
3.3%.
Other
data
showed
the
labor
market
remains
robust
as
Initial
Jobless
Claims
for
the
week
ending
July
6
came
in
better
than
expected
at
222K,
below
the
consensus
of
236K
and
the
previous
reading
of
239K.
This
highlights
the
labor
market’s
strength,
though
data
released
during
the
day
reaffirmed
a
Goldilocks
scenario.
After
the
data,
the
odds
of
a
September
Fed
rate
cut
have
increased
to
84%,
up
from
72%
on
Wednesday,
via
the
CME
FedWatch
Tool,
The
US
10-year
Treasury
bond
yield
plunged
seven
and
a
half
basis
points
to
4.214%,
though
it
hit
its
lowest
level
since
March
earlier
at
4.168%.
This
pushed
Gold
prices
above
$2,400
and
Silver
above
$31.00
a
troy
ounce,
each.
Data
from
the
Chicago
Board
of
Trade
(CBOT)
shows
that
traders
expect
49
basis
points
(bps)
of
easing,
according
to
December’s
2024
fed
funds
rate
futures
contract.
Fed
FAQs
Monetary
policy
in
the
US
is
shaped
by
the
Federal
Reserve
(Fed).
The
Fed
has
two
mandates:
to
achieve
price
stability
and
foster
full
employment.
Its
primary
tool
to
achieve
these
goals
is
by
adjusting
interest
rates.
When
prices
are
rising
too
quickly
and
inflation
is
above
the
Fed’s
2%
target,
it
raises
interest
rates,
increasing
borrowing
costs
throughout
the
economy.
This
results
in
a
stronger
US
Dollar
(USD)
as
it
makes
the
US
a
more
attractive
place
for
international
investors
to
park
their
money.
When
inflation
falls
below
2%
or
the
Unemployment
Rate
is
too
high,
the
Fed
may
lower
interest
rates
to
encourage
borrowing,
which
weighs
on
the
Greenback.
The
Federal
Reserve
(Fed)
holds
eight
policy
meetings
a
year,
where
the
Federal
Open
Market
Committee
(FOMC)
assesses
economic
conditions
and
makes
monetary
policy
decisions.
The
FOMC
is
attended
by
twelve
Fed
officials
–
the
seven
members
of
the
Board
of
Governors,
the
president
of
the
Federal
Reserve
Bank
of
New
York,
and
four
of
the
remaining
eleven
regional
Reserve
Bank
presidents,
who
serve
one-year
terms
on
a
rotating
basis.
In
extreme
situations,
the
Federal
Reserve
may
resort
to
a
policy
named
Quantitative
Easing
(QE).
QE
is
the
process
by
which
the
Fed
substantially
increases
the
flow
of
credit
in
a
stuck
financial
system.
It
is
a
non-standard
policy
measure
used
during
crises
or
when
inflation
is
extremely
low.
It
was
the
Fed’s
weapon
of
choice
during
the
Great
Financial
Crisis
in
2008.
It
involves
the
Fed
printing
more
Dollars
and
using
them
to
buy
high
grade
bonds
from
financial
institutions.
QE
usually
weakens
the
US
Dollar.
Quantitative
tightening
(QT)
is
the
reverse
process
of
QE,
whereby
the
Federal
Reserve
stops
buying
bonds
from
financial
institutions
and
does
not
reinvest
the
principal
from
the
bonds
it
holds
maturing,
to
purchase
new
bonds.
It
is
usually
positive
for
the
value
of
the
US
Dollar.
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