So Rick Santelli joins us from Chicago with today's bond report. Hi Rick. >> Hi Courtney.Indeed. We had 69 billion two-year note yields at 11:30 auction. I gave it a C.Demand was pretty good. Then at 1:00 Eastern, we had 70 billion 5 years. That was a very solid auction.I gave it a B. Let's look at that 5-year. Now, as you look at a six-hour chart, right around the time the auction was buttoning up around 1 Eastern is when we put in our low yields.We've been hovering right about there. Keep in mind the two- ...

Japan should avoid taking on more debt to boost its economy, a senior IMF official warned, as concerns over higher spending triggered by political instability put pressure on long-term bond yields https://t.co/skCC0lDvlX ...

Monetary Policy - South Africa's central bank is aiming at the bottom of its 3% to 6% target range [1] - Lowering the official inflation goal could lead to a further decrease in bond yields [1] Bond Market - Bond yields have already significantly decreased following the central bank's announcement [1]

Group 1: Dollar Index and Economic Indicators - The dollar index rose by +0.63%, reaching a 2.25-month high, supported by higher bond yields and weakness in stocks, which increased liquidity demand for the dollar [1] - Fed Governor Michael Barr's hawkish comments on a cautious approach to further Fed rate cuts contributed to the dollar's gains [1][3] - The ongoing US government shutdown, now in its second week, poses a bearish outlook for the dollar, with potential negative impacts on the US economy [2] Group 2: Euro and Yen Performance - The EUR/USD pair fell by -0.64%, hitting a 2.25-month low, primarily due to dollar strength and weaker-than-expected German trade data [5] - Political uncertainty in France is negatively impacting the euro, although President Macron's announcement of a new prime minister could mitigate the need for a snap election [5] - The yen is also under pressure due to political risks in Japan, benefiting the dollar [1] Group 3: Federal Reserve Outlook - New York Fed President John Williams indicated support for lower rates this year if economic conditions evolve as expected, with inflation projected to rise to around 3% and unemployment increasing beyond 4.3% [4] - The market is pricing in a 95% chance of a -25 basis point rate cut at the upcoming FOMC meeting on October 28-29 [4] Group 4: European Central Bank (ECB) Stance - The ECB's September meeting minutes were slightly hawkish, indicating a decision against an interest rate cut due to upside inflation risks [6] - Policymakers suggested that maintaining the current policy rate is warranted given the materialization of upside risks [6]

Let's talk a little bit about what he's saying in Japan. Mark, your take on it. Is it an overreaction.Equities up very, very sharply decent moving the yen decent move in JGBs. I think it's the correct reaction. I think it's an appropriate reaction, not necessarily an overreaction, but this isn't the start of sustainable trends.So we've got a likely new prime minister who is much more in favour of kind of fiscal expansion and certainly to get that kind of coalition, that's what she's going to probably have t ...

Bond Market Trends - Bond market yields are rising despite weaker than expected economic data [1] - Two-year and 10-year yields are up several basis points on the session but down about eight basis points on the week [3] - The market tried to reach the 4% level on a 10-year bond yield but didn't quite make it [3] Economic Data Impact - Service sector data was disappointing, while prices paid were higher than expected [1] - The market reacted to the data by initially hitting low yields, then yields moved higher [2] Technical Analysis - The NASDAQ index has a higher high and a lower low than yesterday [4] - If the NASDAQ closes below yesterday's low, it would be a key reversal from all-time highs, which could be bearish [4]

Market Overview - The government shutdown has had minimal impact on the stock market, with the Dow remaining flat and fluctuating around positive territory, closing at a record high on Tuesday [1] - The S&P 500 and Nasdaq Composite both experienced a slight decline of less than 0.1% [1] Bond Market - The yield on the 2-year Treasury note decreased to 3.56%, while the 10-year yield fell to 4.11% [2] - Bond yields dropped following the ADP report indicating a loss of 32,000 private jobs in September and 3,000 in August [2]

Investment Strategy - Investors should secure attractive bond yields as central banks continue to cut rates [1] - Fixed income returns potentially surpassing cash returns is anticipated [1] Market Outlook - Pimco suggests locking in yields amidst central bank rate cuts [1]

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the monetary policy and bond market in China, specifically focusing on the People's Bank of China (PBOC) and the China Government Bond (CGB) market. Core Insights and Arguments 1. **PBOC's Easing Bias**: The PBOC maintained an easing bias during the Q3 Monetary Policy Committee (MPC) meeting, emphasizing the effective implementation of existing measures. This aligns with the Q2 Monetary Policy Report, indicating limited appetite for near-term easing [1][2][2]. 2. **Economic Assessment Downgrade**: The PBOC downgraded its economic assessment, changing its language from "showing positive momentum" to "making strides while maintaining stability." This shift has led to increased expectations for monetary easing in Q4, particularly around the late-October Politburo meeting [2][2][2]. 3. **Expected Policy Cuts**: The baseline expectation is for a dual cut in Q4, consisting of a 10 basis point policy rate cut and a 50 basis point reduction in the Reserve Requirement Ratio (RRR), as year-over-year growth is projected to decelerate sharply towards 4% [1][2][2]. 4. **Data-Dependent Decision Making**: The PBOC's emphasis on data dependency leaves open the possibility of no action if full-year growth remains on track for the "around 5%" target [1][2][2]. 5. **CGB Market Dynamics**: The recent sell-off in the CGB market is attributed to technical and regulatory factors rather than a shift in macro fundamentals. Temporary pressures from potential tax and redemption rule changes have pushed yields above fair-value anchors [1][2][2]. 6. **Potential for CGB Purchases**: There is a lower bar for the PBOC to resume CGB purchases, but there is still little urgency. The PBOC had initiated CGB purchases last August to expand its liquidity management toolkit [3][3][3]. 7. **Regulatory Changes Impacting CGB**: Speculation regarding changes in tax treatment and new redemption fee rules for bond funds has contributed to the recent CGB sell-off. The removal of VAT exemptions on interest income from newly issued government bonds has raised concerns among investors [7][7][7]. 8. **Redemption Fee Structure**: Proposed draft rules would impose tiered redemption fees on bond funds, which could further reduce the appeal of these funds for institutional investors [9][9][9]. 9. **Market Stabilization Expectations**: If the sell-off in the CGB market continues, it is anticipated that the PBOC would intervene to prevent an abrupt rise in bond yields [7][7][7]. Other Important Considerations - The PBOC's performance evaluation for primary dealers, mainly large banks, is expected to help stabilize the bond market [7][7][7]. - About 80% of this year's government bond quota has already been issued, indicating less funding pressure in Q4 compared to the 2023-24 period [7][7][7]. - The report emphasizes that investors should consider this analysis as one of many factors in their investment decisions [5][5][5].

Interest Rate Trends - In the fall of 2024, the Federal Reserve lowered the Fed funds rate by 100 basis points [1] - Contrary to expectations, the 10-year Treasury yield increased from 36% to 47% during the same period [2] - As of September 17th, the Fed has restarted its rate cutting cycle [3] - Before the cut, the 10-year Treasury yield was at 405%, and it slightly increased to 413% over the next 5 days [4] Inflation and Market Reaction - Analysts suggested the initial rate cuts were premature due to persistent inflation [2] - Headline inflation remains above the Fed's 2% target [2] - The modest increase in yield after the recent rate cut may indicate a market rotation into equities [4] - The bond market's inflation perception could change based on upcoming PCE and CPI data [5] Economic Concerns - Rising yields may be due to inflation concerns or the increasing amount of debt needing to be rolled over [5] - Reduced demand from China could impact the US [5]