Quiet Day for Treasurys Ahead of FOMC Minutes Tomorrow

Equities highlight a quiet rates session. Swap rates and Treasury yields were little changed and garnered few headlines in today’s session, a rarity given the past month of volatility that has sent rates ~40bps higher since the start of February. Meanwhile, markets are looking ahead to tomorrow’s Fed minutes, which could reveal further insight on the potential timeline for rate cuts. Equities were at the forefront ahead of Nvidia’s earnings call tomorrow, which fell 4.35% today despite strong revenue expectations that should be buoyed by its data center business. The tech-heavy NASDAQ dropped 0.92%, while the SPX fell 0.60%.

Largest cut to key Chinese mortgage rate since 2019 fails to move markets. Lest we forget about the troubles facing China’s property sector, the People’s Bank of China (PBOC) announced a surprise 25bp cut to the five-year loan prime rate, now at 3.95%, after holding the one-year rate unchanged on Sunday. This is the first cut since May 2023 and was likely aimed at supporting the nation’s property market recovery since cities will be able to stimulate demand by reducing minimum mortgage rates. A possible downside is that it could add further pressure to Chinese bank margins. Regardless, markets largely shrugged off the move as Chinese stocks and bond yields were little changed.

BOE Governor Bailey is “comfortable” with expectation for rate cuts in 2024. Andrew Bailey said today that expectations for rate cuts this year are “not unreasonable.” He added that inflation does not need to fall back to 2% for rate cuts to ensue and cited “encouraging signs” in the labor market, as well as the need for “sustained” progress. Futures markets are currently pricing in one to two 25bp cuts by August, and ~75bps of cuts in total during 2024.