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US 10-Year Bond Falls While Bank of England Inching Towards Rate Cuts

Miguel A. Rodriguez
Miguel A. Rodriguez
21 December 2023

US home sales are gaining traction, pointing towards a hopeful 2024. The odds for BOE rate cuts early next year are increasing, and while US Bonds continue to dip. Read on to gain the market news for yesterday, December 20th, 2023. 

US 10-Year Bond is Seeing Record Levels After a Downslide

US Treasury yields continued to fall as stocks struggled to push forward on their bull run after a new round of data pointed to the possibility of a soft landing for the North American economy.

The yield on the US 10-year bond fell three basis points after reaching levels not seen since July. This interest rate, considered the reference rate, has fallen more than 40 basis points this month.

US Home Data Shows Potential for a Surge in 2024

Data from the National Association of Realtors showed yesterday the sales of existing homes in the United States rose in November from a 13-year low, after previously released data showed mortgage rates fell to their lowest level since June.

On the other hand, US Consumer Confidence in December rose the most since the beginning of 2021.

Both point to a robust economy in which domestic demand remains solid despite the tightening of monetary policy carried out by the Federal Reserve. In this favorable scenario, the North American stock indices continue to set new historical highs daily.

Bank of England and Interest Rate Cuts in Focus

In Europe, the main attraction of yesterday's session was the release of the UK CPI data.

The report pointed to much lower-than-expected inflation figures in the UK in November, proving market expectations for faster interest rate cuts by the Bank of England.

The odds of a BOE rate cut in May were about 65% before the data, but now investors are 100% betting on this possibility and even beginning to price in a possible earlier rate cut in March. This comes despite comments last week from BOE officials, indicating that they are still a long way from announcing interest rate cuts. 

As a result, the Pound dropped, and the GBP/USD pair fell from 1.2710 to 1.2645 during the session. The Dollar remained stable throughout, remaining more mixed but maintaining slight gains against mainly European currencies. 

Interfaz de usuario gráfica, Gráfico, Gráfico de líneas

Descripción generada automáticamente

GBP/USD daily chart, December 21, 2023. Source: CAPEX.com WebTrader.      

Key Takeaways

  • The US 10-year bond fell three basis points.
  • The interest rate has slid more than 40 basis points this month.
  • The National Association of Realtor Data showed sales in the US rose in November from a 13-year low.
  • Investors believe that rate cuts are imminent, look towards March for the BOE. 

 

Sources: Bloomberg, Reuters 

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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.