The week seemed likely to end on a fine double-double for stock market indices and Treasury bonds alike.
Everything was looking up shortly after 2:30 pm, with the publication of a 'good' PCE index.
The annual inflation rate for the US "consumer basket" fell by -0.1% as expected to 2.6% on a gross basis, and by 0.2 points to 2.6% on an underlying basis (excluding energy and food), compared with an expected -0.1% decline on a core basis.
The U.S. 10-yr was very happy with these figures, easing 4 points to 4.2600% shortly after 2.30 p.m... but the tide turned at around 3 p.m., and the heaviness increased with each passing minute, so that the T-Bonds ended at their lowest point, with yields (+5Pts this Friday and +8Pts weekly) at their worst levels of the week, i.e. 4.34%, with the '30-yr' adding +6Pts to 4.487%.

The Commerce Department also reported that US household spending rose by 0.2% in May compared with the previous month, while incomes rose by 0.5% (more than expected).

It's hard to say whether the majority of 'optimists' (58%) will continue to expect the Fed to cut rates after its September meeting, but the strength of growth and persistent inflation have called into question the idea that the Fed will make several rate cuts this year.

The trend is no more positive this evening in Europe: our OATs are stretching +3Pts towards 3.303% (+12Pts over the past week, +20Pts since June 7, the worst level since early November 2023), while Bunds are off +4Pts towards 2.4910% (+8Pts hebdo): the OAT/Bund spread remains above 83Pts.
Italian BTPs fare better than Bunds with +3Pts to 4.065%, while the Portuguese '10 yr' (3.2300%) continues to widen the gap with our OATs, its advantage reaching a record +7Pts.
OAT holders are showing their nervousness ahead of the first round of French parliamentary elections this Sunday.

If the latest polls are to be believed, the most likely scenario is a hung parliament with no dominant party", say analysts at Danske Bank.

"In such a context, the markets' worst fears surrounding vast increases in budget spending should ease, as the new government will inevitably have to accept compromises in order to pass its bills", stresses the Danish bank.

Investors today failed to react to a number of statistics published in Europe this morning: French consumer spending on goods rebounded in May by 1.5% in volume terms (after -0.9% in April, a figure revised down 0.1 points on the initial estimate).

In addition, over one year, consumer prices in France are expected to rise by 2.1% in June 2024, down from 2.3% the previous month.

The same trend was observed in Spain, where inflation fell again in June, as announced by the National Statistics Institute (Ine) on Friday, mainly due to lower fuel prices.

But the political news in the United States also prompts caution, as Donald Trump seems to have been far more convincing than Joe Biden last night in the first debate between the two main presidential candidates.

According to a CNN poll taken during the night, Donald Trump was the clear winner of this first televised duel ahead of the November election, with 67% of viewers giving him the victory against 33% for the outgoing president, who was judged to be tired and confused.

On the oil market, crude oil prices remain on an upward trend, with a barrel of Brent rising by 0.7% to $87 (the highest in 2 months)... this should not raise hopes of lower prices over the coming weeks.

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