Michele Schneider | Jun 13, 2024 12:30AM ET
On June 3rd, the Daily covered the long bonds.
Here are the thoughts-answers from June 3rd in bold, answers today in red bold:
Monetary Policy: In the June FED meeting, when the Fed signals a shift toward lower interest rates, bond prices tend to rise-are they getting ready to do a June cut?
They did not cut and may not cut until after the election-that is a good thing for confidence in the economy
Economic Conditions: A moderating economy, dovish central bank discourse, and forecasts for milder GDP growth can all contribute to bond rallies. At the end of this week, we will see the updated non farms payroll number-is unemployment increasing?
Jobs number was strong, but nuanced-Fed says economy strong
Inflation Expectations: If inflation remains subdued, bond markets anticipate progress, leading to rallies-PCE last week came in with some areas of inflation subdued.
CPI comes in flat-not enough for the Fed to cheer-as not near their target, but they hinted they could lower if inflation falls further
Supply and Demand: When demand for bonds exceeds supply (more buyers than sellers), bond prices rally. China has been selling US bonds-are they done?
Seems like China paused-and could go back to selling-yet the demand from recent auctions in the US are better
Hence, the Gordian Knot is yet to be untied (Monday’s Daily).
And the long bonds rallied right to the 50-week moving average and stopped.
If TLT clears, note the Leadership chart. We would be concerned if TLT begins to outperform SPY.
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