Daily Market Color May 8, 2024Swedish Central Bank Cuts Rates by 25bps Rates climb after weak 10y UST auction. Swap rates and UST yields rose 1-4bps today across a steepening curve after a $42B 10y UST auction saw weak demand. The impact of high Treasury issuance was felt today after yesterday’s 3y note auction saw strong demand, while a $25B 30y auction awaits later this week. Meanwhile, equities were relatively flat today after recently having their best 3-day performance of the year. The DJIA led major equity indices with a 0.44% rally. Sweden cuts rates for the first time this cycle. Sweden’s central bank cut rates by 25bps to 3.75%. The move came after the central bank said in March that rate cuts were likely in either May or June, and they added today that two more rate cuts are likely to occur this year if inflation is as expected. They stated, “When inflation approaches the target while economic activity is weak, monetary policy can be eased.” However, they caveated that a cautious approach much be taken for incremental rate cuts, given that the inflation outlook is “uncertain.” Bank of Japan (BoJ) Governor Ueda issues strong statements to try to support the yen. At an event in Tokyo today, BoJ Governor Ueda said, “Abrupt and one-sided weak yen moves…are negative for Japan’s economy…for example, they make it hard for companies to formulate their business plans.” The remarks follow a meeting with Prime Minister Kishida yesterday where Ueda told Kishida that he is closely monitoring the currency situation, and in turn may have been asked by Kishida to intensify his comments to support a yen that hit 160 per USD for the first time since 1990. The comments failed to boost the yen, which fell from ~154.75 late last night to ~155.65 per dollar today.
