11/09/2025 Daily Reports
Bond traders are closely watching the upcoming US CPI report, which could challenge expectations of aggressive Fed rate cuts.
Markets are pricing in at least five 25 bps cuts by this time next year, with three expected by year-end.
Two-year Treasury yields dropped to 3.51% after weaker PPI data, highlighting market sensitivity to inflation indicators.
Economists forecast core CPI growth at 3.1% annually, well above the Fed’s 2% target.
A strong CPI print could undermine expectations for rapid cuts and pressure short-term bonds.
Political pressure is rising, with President Trump criticizing Powell for being too slow to cut rates.
The Fed’s dot plot next week will provide fresh clues on the policy path into 2026.
Longer-term US yields remain elevated near 5% due to fiscal concerns, despite the rally in shorter maturities.
What’s Next?
Markets may be overestimating the Fed’s willingness to cut aggressively in the face of sticky inflation. If CPI data surprises to the upside, traders could face a sharp repricing, especially in the front end of the curve.
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SoftBank Surges on Oracle’s AI Boom, Eyes on ECB and U.S. Inflation Data
SoftBank jumped 9% in Tokyo after partner Oracle rocketed 36% — its biggest one-day gain since 1992 — as the U.S. tech giant forecast booming AI-driven demand for its cloud services. Oracle’s rally, which brought it close to a $1 trillion valuation, spilled over into Asia’s equity markets, lifting the Nikkei by 1.2%, Taiwan stocks by 1%, and Chinese blue chips by 1.8%. European shares, however, looked subdued ahead of today’s European Central Bank meeting, with Eurostoxx 50 futures up just 0.1% as policymakers are expected to keep rates steady at 2%, while leaving the door open for further cuts into 2025.
The bigger test for markets will come with U.S. inflation data. Headline CPI is seen rising 2.9% year-on-year in August, the fastest pace since January, while core inflation is expected to stay at 3.1%. A tame reading would reinforce expectations for a quarter-point Fed cut next week — already fully priced — and could even boost bets on a larger half-point move, weakening the dollar and pulling Treasury yields lower. A hotter print, however, would complicate the Fed’s path, leading traders to scale back bets on as many as three cuts this year. Futures currently price in 67 basis points of easing for 2025, equivalent to two to three rate cuts.
