Bond yields sink as Fed bets rise
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Why are bond yields falling sharply today?
Big falls in bond yields today. Why? Well, producer prices have fallen, retail sales are flat. Maybe the Fed can squeeze in more rate cuts this year. Stock markets are higher, presumably on the hope of that. Well, except for the Nasdaq, which has taken a bit of a hit. Worries about AI could be part of that. And oil well down. Why? Because well, maybe Iran will be adding to the global supplies sometime soon. Thanks. to Donald Trump. And we'll look at Aussie employment numbers yesterday as well. Why so high? It's Friday, it's the sixteenth of may twenty twenty five. It's the morning call from NAB. Good morning. Well the US dollar has been up and down a lot today, but down nort two percent on yesterday, right now, below a hundred point nine on the DXY.
The Aussie is down nort four percent, down to sixty four US cents. The pound is up naught point three per cent. The euro ultimately flat on the day and equities mixed. This time it's the Nasdaq that's down, down naught point two percent. Uh it's been in the red anyway, but uh not helped by a big fall in the meta share price. More on that later, but a nort point seven percent lift in the Dow and a nort four percent rise in the S P at five thousand nine hundred and eighteen. That is twenty two percent up on the april the eighth low, uh as though tariffs aren't such a big thing after all. And the Eurostocks fifty is up nort. two percent, nort. six percent for the FTSE one hundred and nort point seven percent for the DAX.
And bond yields lower, down nine basis points for ten year treasuries, down ten in Canada, down eight. eight in Germany, nine in France and down five in the UK.
What do the recent Aussie ten‑year yield moves indicate about Fed rate‑cut expectations?
Aussie ten year yields, which are up five basis points yesterday to four point five three percent. Now overnight seven or eight basis points lower than that on futures. And oil lower, two point two percent off WTI and Brent, which is below sixty five a barrel now, and gold back up as well, up one and a half percent today. So more concerns about risk. Although the VIX is down, heading uh towards eighteen this morning. It's uh been around that for most of this week, which is uh where it was uh before Liberation Day and then shot up of course. So what is the mood right now? Here's Nab's Ray Atral in Sydney. Uh so I mean this big the biggest move of course has been the uh the the move uh in bond yields uh driving much lower.
So what's what's happening there?
Uh yeah, good morning, Phil. But uh yeah, I mean just briefly I'd say that looking across markets there doesn't seem to be a lot of rhyme and reason across markets. You know, if I look at the FX market, it's behaved sort of differently to to how certainly how the bond markets behaved and and equity markets look a little bit flat-footed, haven't they, with the um you know the S P up at uh time of this recording and uh and the and the Nasdaq down a little bit. But uh but I think the you know for me the sort of standout moves overnight as you know, as you say in your intro, is really bond markets with those sort of eight to nine basis point declines pretty much across the uh the US Treasury yield curve.
And I think first and foremost I'd probably point to those producer price numbers, which show you know scant um indication that that the tariffs uh have to date at least had any sort of material impact as far as producer prices is concerned. Maybe it's saying something about the absorption of uh of margins. Although it's probably worth noting out there are a couple of what I would call funnies in those PPI numbers, which actually relates to the the collapse and all the the the crunch in the stock market. There's something called portfolio management charges in PPI, which has actually got a a a surprisingly large weight. And essentially what that says is if you are a stockbroker, and you're charging people a commission, that commission effectively, in nominal terms, is a function of of how high or how low stock prices are.
So when stock prices fall a lot, if you're charging effectively a a small percentage in terms of brokerage fees, that fee is lower, the lower our stock prices, and vice versa.
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Chapters
8 chapters
1
Why are bond yields falling sharply today?
0:01–1:33
2
What do the recent Aussie ten‑year yield moves indicate about Fed rate‑cut expectations?
1:33–4:15
3
How is the Fed’s core PCE inflation outlook shaping future monetary policy?
4:15–6:54
4
Are recession fears justified by the latest retail‑sales and unemployment data?
6:54–9:28
5
Will Iran’s potential oil‑supply increase and Trump negotiations push prices lower?
9:28–11:49
6
Is the RBA likely to cut rates next week despite steady unemployment?
11:49–14:40
7
What does the unexpected UK GDP growth mean for the British economy?
14:40–17:25
8
Which upcoming economic releases (Japan, NZ, US) could move markets this week?
17:25–18:39