Long-Term Interest Rates Higher Still
April 8, 2024
Ten-year sovereign debt yields climbed so far today by four basis points in Germany, two bps in the U.S. and U.K., and a basis point in Japan.
The dollar is marginally lower, slipping 0.2% versus the euro, 0.4% against the kiwi, 0.3% relative to the Aussie dollar, and 0.1% vis-a-vis sterling. Not all dollar relationships weakened. The greenback also advanced 0.3% against the swissy and 0.1% vis-a-vis the yen.
Equities did not succumb to the rise in interest rates. In the U.S., the DOW and S&P 500 are each 0.2% firmer. Japan’s Nikkei-225 closed 0.9% higher, and share prices also gained in India, Indonesia, and Taiwan. The German DAX and Paris CAC currently show advances today of 0.7% and 0.8%, and the British Ftse is up 0.3%.
Bitcoin‘s value leaped 3.1% and moved above $71k. Oil and gold prices have eased 1.1% and 0.1%.
More central bank meetings are scheduled this week and last, and the Fed publishes minutes from the last FOMC meeting on Wednesday. This week’s release of U.S. consumer, producer and import price data also is commanding much attention, but America’s solar eclipse today has been a huge distraction. Friday sees the first U.S. first-quarter corporate earnings announcements.
The Bank of Israel left its key interest rate at 4.5%. Quite a few analysts had predicted a cut in view of the heavy hit to Israeli GDP growth from its war in Gaza and in light of Israeli CPI inflation of 2.5% as of February being at a 27-month low and back within its targeted corridor. In leaving policy unchanged, officials explained that “in view of the war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity.” From a peak central bank rate of 4.75% attained in May 2023, there has thus far been just a single rate cut of 25 basis point made this past January. Before inflation became a global problem in 2021-22, the Bank of Israel’s policy interest rate had been a mere 0.10% for two years between April 2020 and April 2022.
The Central Bank of the Philippines also left its policy interest rate unchanged. At 6.50% since a 25-basis point hike last October, the rate level has been its highest in 16 years versus a pandemic low of just 2.0% from November 2020 until May 2022. A released statement notes that
The risks to the inflation outlook continue to lean toward the upside. Possible further price pressures are linked mainly to higher transport charges, elevated food prices, higher electricity rates, and global oil prices. Potential minimum wage adjustments could also give rise to second-round effects.
- The current account of JPY 2.664 trillion in February underwhelmed analysts expectations was only half January’s size on a seasonally adjusted basis.
- Average Japanese cash earnings posted a 1.8% year-on-year rise in February after 2.0% in January.
- The economy watchers index, a gauge of the sentiment among service sector workers, fell to a 14-month low in March of 49.8 versus 55.0 last May.
Germany’s trade surplus narrowed to a 4-month low of EUR 21.4 billion on a seasonally adjusted basis in February, but the unadjusted surplus of EUR 24.7 billion was still a third wider than in February of 2023.
German industrial production rose 2.1% in February after rebounding 1.3% in January but was still 4.9% less than in the same month a year earlier. The 12-month rate of industrial production growth has negative without interruption since May of last year.
Other countries reporting industrial production for February today included Turkey (+2.4% on month and +11.5% on year); Norway (-4.3% on month and +1.8% on year); Malaysia (-6.3% on month and +3.1% on year); and the Czech Republic (+1.9% on month and +0.7% on year).
Egyptian consumer price inflation of 33.3% in March exceeded 30% for the second straight month but was somewhat lower than in February.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Israel, Central Bank of The Philippines, German industrial production and trade surplus, Japanese current account