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Stock index futures were in the green again Wednesday with rates continuing to move lower.
S&P futures (SPX) +0.3%, Nasdaq 100 futures (NDX:IND) +0.4% and Dow futures (INDU) +0.3% were up.
“The bond bear market bubble has burst, at least for now,” ING said. “Two reasons for this are 1) lower US hike risk, and 2) the elevation in geopolitical tension.”
“Even some firm US CPI data might not change this. But there’s no reason for market rates to collapse lower either here, as macro tension remains elevated on the inflation front.”
The 10-year Treasury yield (US10Y) fell 9 basis point to 4.56%. The 2-year yield (US2Y) fell 2 basis points to 4.95%.
See how yields are trading across the curve.
“The US 2-year is now back to levels first seen in June this year when the funds rate was 25bp lower,” ING SAID. “The 10-year is off its recent highs, but still practically 80bp above where it was in June. The curve has clearly steepened over this period.”
“There is a 4.5% risk ahead for the 10-year, unless the inflation data is high enough to cause a reversal higher in yields.”
There is a $36B 10-year auction later today.
Before the bell, the September PPI arrives. Economists expect a 0.3% rise in the headline number for the month, with a 0.2% rise in the core rate.
“Core PPI inflation has plunged over the past year=and-a-half, dropping to just 2.1% in August from the 9.7% peak in March 2022,” Pantheon Macro said. “The steep drop in core PPI inflation is a much more significant development in the U.S. than similar declines in PPI inflation elsewhere, because the U.S. PPI – uniquely, as far as we know – is a measure of output prices across the whole economy, not just goods prices as they leave the factory.”
The FOMC meeting minutes are due this afternoon. The odds of a Fed hike in December have now fallen below 30%, according to fed funds futures.
“The minutes of the last Federal Reserve meeting are due,” UBS’ Paul Donovan said. “However, recent Fed speakers have offered a suspiciously coordinated set of dovish comments – almost as if trying to talk bond yields lower – and those remarks may take precedence over the minutes.”
