The oil price irritant will do little to ease the fresh angst in Treasury debt markets, where 2- and 10-year yields hit their highest in almost a month early on Monday ahead of this week’s latest Federal Reserve meeting.
U.S. Treasury exchange-traded funds are now down 2% for the year to date, with long duration versions containing 20 and 30-year bonds off about 6% for 2024.
There is no hope of a Fed rate cut this week, but their new economic projections may be a wild card – potentially signaling fewer interest rate cuts and a later start to the policy easing than they previously had estimated.
Futures markets are now not pricing a full Fed rate cut until July, seeing only a 50-50 chance of a move as soon as June and just 75 basis points of easing over the whole year.
U.S. March homebuilder sentiment readings are due out later on Monday, but are unlikely to have much of a bearing on this week’s Fed meeting – where discussions will also likely start on possible tapering of the central’s bank’s balance sheet rundown.
The brighter growth and edgier oil and inflation outlook also ups the ante for tomorrow’s Bank of Japan decision, where speculation is now rife the BOJ will end its negative interest rate policy following months of second-guessing and after news last week of the highest wage growth in more than 30 years.
The Nikkei newspaper on Saturday became the latest media outlet to flag the policy move as soon as Tuesday.
But Japanese markets now seem well prepared for the shift – with the yen softening to its weakest level in almost two weeks near 150 per dollar and the Nikkei stock benchmark rallying more than 2% on Monday.
The dollar was steady more generally.
In company news, the day ahead is likely to be dominated by artificial intelligence bellwether Nvidia’s annual developer conference. Nvidia’s stock price was up 2% ahead of the bell in anticipation.
