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At Any Rate
US Rates: July Morning turns into Cruel Summer
Aug 9, 2024
Jay Barry and Srini Ramaswamy, Co-Heads of US Rates Strategy at JPMorgan, dive into the recent twists in the financial markets. They discuss the weak Payrolls report and its implications for potential interest rate cuts. The duo also analyzes the shifting dynamics in interest rates, driven by both domestic and international factors. They shed light on treasury market volatility and liquidity issues, while unpacking the intricacies of the repo market. Their insights on quantitative tightening reveal its significance for future monetary policies.
21:43
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Quick takeaways
- The weaker July payroll report and rising unemployment have led to expectations of more aggressive Federal Reserve interest rate cuts in the upcoming months.
- Increased market volatility and reduced liquidity are impacting auction performance, particularly for longer-duration bonds, pending clearer guidance from the Federal Reserve.
Deep dives
Impact of Recent Employment Data on Federal Reserve Policy
Recent employment data significantly influenced market expectations regarding Federal Reserve policy. The latest payroll report revealed 60,000 fewer jobs than anticipated, contributing to a rise in the unemployment rate to 4.3%. Other data, including weaker claims from continuing employment and declines in the ISM survey, further underscored a cooling labor market. In light of this information, the Fed is now expected to implement interest rate cuts more aggressively, projecting cuts of 50 basis points in September and November, aiming for a target range of 3% by midsummer next year.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode