'Global Bond Prices Rise for Second Day on Hopes of US Interest Rate Peak'

2-Year US Treasury Yield Falls 14bp to 4.61%

As inflation in the United States gradually eases, global bond yields are falling (bond prices rising), fueling the rally.

According to Bloomberg on the 13th (local time), short-term bonds led the upward trend, with the 2-year U.S. Treasury yield, which is sensitive to monetary policy, dropping 14 basis points (1bp=0.01 percentage point) to 4.61%.

Short-term UK government bonds also fell by 30 basis points, the largest decline since March over the past two days. The 10-year U.S. Treasury yield, a benchmark for market interest rates, also dropped 9 basis points to 3.77% on the same day.

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Justin Widener, an economist at Deutsche Bank, a major German investment bank, said in a report, "Recent inflation-related indicators reinforce our confidence that the rate hike in July will be the last."

Earlier, the U.S. Department of Labor announced on the 12th that the Consumer Price Index (CPI) for June rose 3.0% compared to the same month last year. The increase in CPI last month was not only 1 percentage point slower than in May (4.0%) but also the smallest since August 2021.

In particular, a report showed that the U.S. Producer Price Index (PPI) for June rose by the smallest margin since August 2020, which helped bond prices continue to rise for the second day.

Bloomberg reported that the possibility of additional rate hikes by the U.S. Federal Reserve (Fed) after July has significantly decreased, and the possibility of a 50 basis point hike by the European Central Bank (ECB) is not fully reflected in bond prices.

Economic analysts had expected earlier this week that the Bank of England (BOE) would raise its benchmark interest rate to 6.5%, but now the forecast has been lowered to 6.25%.

Evelyn Gomes-Lichty, a rate strategist at Mizuho, said, "The current bond rally has strong momentum and is expected to continue for some time. However, a strong labor market and a resilient services sector still pose upside risks to U.S. inflation outlook."

This content was produced with the assistance of AI translation services.