[U.S. Market Conditions]Government bond yields at their highest since the start of the year, influenced by GDP – Yen at daily low

US bond prices fell on the 25th. The sell-off increased as preliminary figures for the U.S. real gross domestic product (GDP) for the January-March period (first quarter) showed an economic slowdown and persistent inflation. U.S. GDP sharply slows down in January-March, inflation accelerates – dampening expectations for a soft landing (3)

national debt	Latest value	Compared to previous business day (bp)	Rate of change
US 30 year bond yield	4.81%	4.0	0.84%
US 10 year bond yield	4.70%	6.0	1.30%
US 2 year bond yield	5.00%	7.1	1.43%
		US Eastern Time	16:51

U.S. Treasuries were sold off, with yields hitting new highs this year. GDP has fueled fears of “stagflation” and brought further uncertainty over the direction of monetary policy. The timing for interest rate cuts indicated by the interest rate swap market was pushed back in December.

Until now, expectations for a soft landing for the economy had been growing on the back of strong demand and subdued upward pressure on prices, but the GDP figures put a damper on such optimism. GDP grew at an annual rate of 1.6% compared to the previous quarter, which was below all forecasts in economist surveys. The core personal consumption expenditure (PCE) price index, which excludes food and energy, rose 3.7%, better than expected.

Chris Zaccarelli of the Independent Advisor Alliance (IAA) said: “These numbers represent a confluence of bad things, with economic growth slowing and inflation pressures continuing. “The market wants to see more economic growth and higher corporate profits.” If neither is heading in the right direction, he said, it would be “bad news” for the market.

The results of the $44 billion seven-year bond auction were largely as expected.

Bill Gross, co-founder of Pacific Investment Management (PIMCO), said, “The 10-year Treasury yield is heading towards 4.75%.There is no need to hold government bonds.Right now, we are maintaining value stocks. You should avoid technology stocks,” he posted on X (formerly Twitter).

2 year bond yield

Source: Bloomberg

Cantor Fitzgerald Chairman and CEO Howard Lutnick said he expects there will be only one rate cut this year, and it will occur before the presidential election. “I think it’s September, not to get the economy going, but to show off by cutting interest rates,” he said.

Fed to cut interest rates only once this year, before presidential election – CEO Cantor

Ian Lindgen of BMO Capital Markets said: “While these statistics will no doubt raise speculation of stagflation, as long as the labor market remains strong, there is no need to worry about such an outcome.” I haven’t done that.”

David Donabedian of CIBC Private Wealth US said the most significant setback in the data is an acceleration in core inflation. “It won’t be long before all speculation of rate cuts disappears,” he said, adding that Fed Chairman Jerome Powell will make more hawkish comments after next week’s Federal Open Market Committee meeting. He expressed the view that it is possible.

The interest rate swap market is pricing in a rate cut of just 35 basis points (bp, 1bp = 0.01%) this year. At the beginning of the year, it had factored in more than six 25bp rate cuts.

The US stock market is falling. However, as Nvidia and Tesla rose, the price declined.

stock	closing price	Compared to previous business day	Rate of change
S&P 500 stock index	5048.42	-23.21	-0.46%
Dow Jones Industrial Average	38085.80	-375.12	-0.98%
Nasdaq Composite Index	15611.76	-100.99	-0.64%

The S&P 500 stock index has fallen to around 5050. It lost some of this week’s gains.

After the close of regular trading, some of the major tech companies will announce their financial results. Microsoft’s January-March (third quarter) financial results showed growth in sales and profits that exceeded market expectations. It was supported by corporate demand for cloud and artificial intelligence (AI) products.

Google’s parent company, US Alphabet also posted sales and net income that exceeded analysts’ expectations. Growth in the cloud computing sector contributed. The company also announced the addition of dividends and share buybacks. Stock prices for both companies rose in after-hours trading.

On the other hand, Intel’s sales and earnings per share excluding some items for the April-June (second quarter) were both lower than market expectations. Stock prices fell in after-hours trading.

In the New York foreign exchange market, the yen exchange rate temporarily fell to 155.75 yen to the dollar. It hit a new 34-year low. There is a growing sense of caution that Japan’s monetary authorities will intervene to buy the yen.

U.S. bond yields rose in response to the PCE price index, and the dollar also rose, but the dollar index subsequently slumped and began to decline. Yen call prices have remained high ahead of the Bank of Japan’s monetary policy meeting, which will announce the results on the 26th.

money order	Latest value	Compared to previous business day	Rate of change
bloomberg dollar index	1260.19	-0.84	-0.07%
dollar/yen	¥155.65	¥0.30	0.19%
euro/dollar	$1.0731	$0.0032	0.30%
		US Eastern Time	16:52

Jiji Press reported that the Bank of Japan will consider ways to reduce government bond purchases during discussions on the second day of its monetary policy meeting held on the 26th. Reported. The government is said to be moving into a de facto quantitative tightening phase in which the amount of government bonds held is reduced.

Asked about her stance on possible moves by Japanese authorities to respond to the yen’s decline against the dollar, Treasury Secretary Janet Yellen said intervention in currency markets should be a rare event.

US Treasury Secretary Yellen says on yen market, currency intervention should be ‘rare’

US crude oil futures prices rebound. The dollar has lost its value, and commodities traded in dollar terms have become less expensive.

U.S. GDP statistics indicate that both the growth rate and the PCE price index are deteriorating, and the market initially remained in negative territory. The stock traded in a narrow range, but ended the day in positive territory.

“With a lack of geopolitical news and data releases, the oil market is still trying to find an equilibrium price,” said Keshav Lohiya, founder of consulting firm Oilytics.

Crude oil prices have risen since the beginning of the year due to the coordinated production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+, which is made up of non-member oil producing countries, and the tense situation in the Middle East. However, prices are currently being pushed back as geopolitical risks ease. Options markets continue to price in a bearish outlook, while the world’s largest crude oil exchange traded fund (ETF) The United States Oil Fund experienced the largest single day outflow ever.

West Texas Intermediate (WTI) futures for June on the New York Mercantile Exchange (NYMEX) closed at $83.57 per barrel, up 76 cents (0.9%) from the previous day. The June North Sea Brent contract on the London ICE rose 99 cents, or 1.1%, to $89.01.

Gold prices rebounded for the first time in four days. Gold’s appeal as a safe-haven asset has increased with GDP data showing a significant economic slowdown.

The GDP statistics also highlighted the persistence of inflation. Although there was increased uncertainty over the future of US interest rate cuts, concerns about gold as an alternative asset were more important than concerns about interest rates.

Ole Hansen, head of product strategy at Saxo Bank, said market participants were unfazed by the prospect of higher interest rates.“Slower growth and faster inflation are a good combination for gold, as it can hurt other assets,” he said. pointing out.

“The correction phase will probably take a little longer, so the upside potential in the near term is limited. That said, the overall case for owning gold has strengthened, not weakened.”

As of 2:11 p.m. New York time, the spot gold price was $2,334.16 per ounce, up $17.99 from the previous day. Meanwhile, June gold futures on the New York Mercantile Exchange (COMEX) rose $4.10, or 0.2%, to close at $2,342.50.