Boost for bonds as European data suggests rate cuts

Boost for bonds as European data suggests rate cuts
Traders are expecting the ECB to ease monetary policy.
JUN 21, 2024
By  Bloomberg

Bonds surged after business activity across Europe encountered an unexpected setback, prompting traders to amp up wagers on monetary easing. 

The yield on Germany’s benchmark 10-year bonds fell six basis points, dragging the rate on US Treasuries lower, after manufacturing and services PMI readings for Europe’s two biggest economies fell short of expectations. A separate index for the whole of the euro-zone also dropped more than forecast in June. Traders now see a second ECB cut by October and an 80% chance of a third this year, up from about 65% on Thursday.

Gilts also jumped, boosted by a UK PMI reading that showed private sector companies reported slower growth than expected. Money markets are now fully pricing two quarter-point cuts in 2024 and the BOE hinted it was nearing a first move after a monetary-policy meeting on Thursday.

The euro slipped as much as 0.3% to $1.0671, its lowest in a week. The currency has been under pressure since French President Emmanuel Macron’s surprise decision to call a snap election after his party’s poor performance at the European Parliament elections, sliding from around $1.09.

“The French PMIs are out and we’re maybe getting the first glimpses of the contagion from the political turmoil to the real economy,” said Valentin Marinov, head of G-10 foreign-exchange research and strategy at Credit Agricole. The positive impact from the Euro 2024 football tournament, which is being hosted by Germany, seems to be “already starting to fade as well,” he said. 

The pound is also taking a hit from growing expectations that rate cuts are imminent, falling to a five-week low versus the dollar. It has lost around 0.3% so far this week, putting it on track for its third straight week of losses.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.