The BoJ's 1st rate hike in 17 years could have been the 'market mover of the day', but it's just another 'non-event' in the grey daily grind of the bond markets... probably victims of the irresistible attraction of equities (with stock market indices breaking record after record, with the CAC40 at 8.201, the E-Stoxx50 at 5.006, the S&P500 at 5.175, etc.).

Traders in Japan gave an unemotional welcome to the Bank of Japan's (BoJ) decision to normalize its monetary policy by raising its key rate to contain the resurgence of inflation and rising wage tensions in the country.
By a large majority, the BoJ Committee decided to put an end to 8 years of negative interest rates, opting for a key rate of between 0% and 0.1%, compared with -0.1%.
Result: Japanese Treasury bills unchanged at 0.7250%.

A wait-and-see attitude prevailed in the US on the eve of the FED's final statement (which should be devoid of surprises), but there were US figures on Tuesday: both housing starts and building permits were back on the rise in February, according to Commerce Department statistics.
Housing starts rebounded by 10.3% last month to a seasonally adjusted annualized rate of 1,521,000, a much stronger recovery than expected.

The number of building permits issued in February rose by 1.9% to an annualized rate of 1,518,000, again exceeding financial market expectations.
Economists were expecting a rebound in both statistics in February, after January's unfavorable weather had weighed heavily on the residential construction sector.

Investors are now hoping that the US Federal Reserve will adopt a similarly reassuring tone at the end of its two-day meeting, which starts today.

Some observers fear, however, that the US central bank is preparing the ground for only two rate cuts this year, whereas it had previously expected three.

In view of the healthy state of the US economy, the money markets now assess a rate cut in June with a probability of only 50.7%, according to the FedWatch barometer.

In the end, a first rate cut may not take place until the third quarter, a far cry from the initial projections of investors who, at the start of the year, were hoping for a reduction in the cost of money as early as March.

US T-Bonds eased -3.2pts to 4.308%, erasing the previous day's losses.

In Europe, the "number of the day" was the ZEW business climate index for Germany, which rose for the 8th month in a row.
This indicator gained 11.8 points between February and March 2023 to stand at 31.7 points, its highest level for 12 months.

"Economic conditions in Germany are fragile, so it will be interesting to see if things have changed in March before the PMI indices are published on Thursday", explains Danske Bank.

On the bond front, Bunds ended the day virtually unchanged at 2.453%, our OATs erased -0.5Pt at 2.8860%, Italian BTPs tightened by +2Pts to 3.7040%.
British Gilts deteriorated by +1Pt to 4.1030%.

Gold, for its part, remains stuck at $2,155.


Copyright (c) 2024 CercleFinance.com. All rights reserved.