Rates spark: Market rates are already discounting a large chunk of rate-cut talk

The 4% 10yr Treasury yield looks a little high relative to the 3.6% briefly touched this week and the rate-cut story ahead.

It’s not though, as there are reasons to validate higher yields in the future. Nearer-term, market rates can ease lower on further risk wobbles and cut delivery.But there’s not much room to the downside, not in a structural sense. Implied rates volatility remains high At face value markets seem to be calming down, but forward-looking volatility measures tell us that we are not yet back to normal.

With that in mind, next week’s US CPI is the reading to watch for the next move in global rates. Medium-term bear issues to be aware of There was a remarkable market reaction to pretty much a nothing claims number yesterday. It came in lower than expected: 233k initial claims. But the subsequent 5bp up-move on the 10yr yield tells us that this market is a tad rudderlessand, in consequence, quite jumpy.

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