Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Morning Brew June 2 2023
Erik Schafhauser
Senior Relationship Manager
Saxo Morning Brew
The debt ceiling is off the table once again and the classic risk assets soar while the USD gives up ground. Weak US fundamentals further fueled the movement further. The Senate voted 63-36 to approve the increase the spending limit.
Nasdaq and S&P 500 soared to 9 month closing highs, the USD Index falls 0.8 points to 103.50, EURUSD 1.0766, GBPUSD 1..2530 and USDJPY 138.90. Gold and Silver rise to 1980 and 23.95, Silver is up 5.25% this week.
Nvidia gained again to trade near 400 on news of a deal with Microsoft for cloud computing infrastructure. The Japanese Nikkei is worth taking a look at, it is trading at the highest levels since the so called bubble economy burst in the early 1990`s at 31.480.
Oil was under pressure again on weak growth and the Opec Meeting starting Sunday takes center stage: OPEC+ meeting takes center stage in crude oil market
Today, all focus will be on the Non-Farm Payroll and the surrounding data at 14:30 CET, expectations are as follows:
Nonfarm Payroll : 190K
Unemployment Rate: 3.5%
Average Earnings: 0.3%
The numbers will have an immediate impact on the US rate outlook that currently looks as follows:
Meeting Date | Implied Rate | Basis Points |
14-Jun-23 | 5.153 | 7.3 |
26-Jul-23 | 5.268 | 17.8 |
20-Sep-23 | 5.197 | 11.3 |
1-Nov-23 | 5.05 | -3.7 |
13-Dec-23 | 4.875 | -21.2 |
31-Jan-24 | 4.665 | -41.7 |
20-Mar-24 | 4.425 | -65.5 |
1-May-24 | 4.177 | -90.3 |
19-Jun-24 | 3.94 | -114.5 |
31-Jul-24 | 3.668 | -141.7 |
25-Sep-24 | 3.532 | -155.2 |
So we are looking at a hike in July and then 6 cuts by September 2024.
Trade safely
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