There was a lot of talk about the September-October rout in the bond market having tightened financial conditions, but since that meeting 10-year yields have dropped more than 50 basis points. That would normally add to the case for staying high for longer.
But the market apparently doesn’t see it exactly that way, with a March rate cut priced at a 29% probability and a May easing at 60%. Futures still imply around 93 bps of cuts for 2024.
Treasury 10-year yields were up 1 basis point at 4.41% , but not far from the recent low of 4.397%. Major currencies were also little changed, although China’s central bank did set another firm fix for its yuan, suggesting it is serious this time about stopping the decline.
Later on Wednesday, Sweden’s central bank will meet in what is expected to be a very close call on whether to hike again. A Reuters poll showed 10 of 19 economists looked for a rise, while market pricing is leaning against a move. A steady decision would likely be taken as the end of the cycle and put the crown under pressure, which argues for a hike today.
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