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Market Brief, North America

Bond Market Turmoil Eases As Labour Markets Slow

A fragile sense of calm is returning to financial markets this morning as investors revert to betting on an aggressive easing cycle from the Federal Reserve. The yield on the 30-year US Treasury is back down to 4.88 percent after flirting with the 5-percent threshold, long-dated bonds in both the UK and Japan are coming off levels last hit in the nineties, and spreads within the euro area are contracting, pointing to an easing in funding concerns. North American equity futures are pointing to a mildly-positive open, and the dollar is holding steady against its major counterparts ahead of tomorrow’s...

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Strains Grow As Investors Shun Long-Term Debt

A global selloff in long-term government bond markets is extending this morning amid a wholesale reappraisal of sovereign debt and inflation risks. Thirty-year securities are coming under the heaviest pressure, with US Treasury yields hovering near 5 percent, Japanese ultra-long bonds holding near record highs*, and British gilts offering their highest rates since 1998. Shorter-dated yields remain comparatively stable, but curves are steepening across the advanced economies as investors demand higher premiums for holding long-term debt. We think technical factors are at work, to some extent. After a later-summer lull, bond markets have been flooded with new issuance in recent...

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Jump In Long-Term Yields Pummels Currency Markets

Traders are cutting risk and global interest rates are ratcheting higher as investors sell long-duration instruments this morning, suggesting that a relatively calm summer in financial markets is quickly coming to a rude end. Treasury yields are climbing across the end of the curve, equity futures are retreating ahead of the North American open, and the dollar is surging against all of its major rivals as a series of idiosyncratic events unleash turbulence across fixed-income markets. 30-year UK gilt yields are holding near their highest levels since 1998 on reports suggesting that chancellor Rachel Reeves is struggling to find fiscal...

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Dollar Firms As US Inflation Accelerates, Loonie Tumbles On Disappointing Growth Data

The Federal Reserve’s preferred inflation measure accelerated as expected in July, making it more difficult to justify an aggressive course of rate cuts beyond September’s widely-anticipated move. Data released by the Bureau of Economic Analysis this morning showed the core personal consumption expenditures index rising 0.3 percent from the prior month, matching market forecasts as a number of key goods and services categories showed signs of firming price pressures. On a year-over-year basis, core price growth accelerated to 2.9 percent—the fastest since February—underlining an intensification in inflation pressures across the world’s largest economy. The overall personal consumption expenditures index climbed...

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US Rate Cut Expectations Tumble Ahead of Jackson Hole

The trade-weighted dollar is holding near a two-week high after yesterday’s hotter-than-anticipated activity data triggered a dramatic reappraisal of the Federal Reserve’s expected easing trajectory, lowering expectations for a clear rate-cutting message from chair Jerome Powell at this morning’s economic symposium in Jackson Hole. Benchmark ten-year Treasury yields are holding steady around the 4.33-percent mark, equity futures are setting a course toward an advance at the open, and most major currencies are holding just below technically-important levels as traders await further clarity before pushing them lower. US private sector activity expanded at the fastest rate recorded so far this year...

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