Finance Association, May 22 (Editor: Xiaoxiang) Global bond prices rose one after another on Tuesday as new evidence showed that developed countries in Europe and the US seem to have finally controlled inflation.

On Tuesday, Canadian treasury bonds led the rise after the latest data showed that the year-on-year increase in Canada's CPI fell to a three-year low. Meanwhile, the yield on the benchmark 10-year US Treasury also fell by more than 3 basis points, as Federal Reserve Governor Waller described the US inflation report released last week as “a reassuring signal.” The UK will release the same key CPI data today.

According to data released by Statistics Canada on Tuesday, Canada's inflation in April fell to a three-year low of 2.7%, in line with expectations. Core indicators also continued to decline. This may increase the possibility that the Bank of Canada will cut interest rates in June. Compared with April, Canada's inflation rate is now closer to the 2% target set by the Bank of Canada. At the time, Bank of Canada Governor Maclum said that the Commission hopes to keep inflation cool down before cutting interest rates.

The Canadian two-year treasury yield was close to an intraday low in late trading in Toronto. The yield traded around 4.22% before the CPI data was released, then fell to 4.15%. The yield on UK 10-year treasury bonds also fell 4 basis points to 4.13% on the same day. Currently, a major focus of attention in the global bond market has also turned to the April CPI data to be released by the British side today.

“We have reason to believe that the rapid pace of inflation we saw in the first quarter was unsustainable and will not continue in the future,” said Michael Lorizio, senior fixed income trader at Boston Manulife Investment Management.

In terms of US Treasury bonds, two-year US bond futures trading once boosted the price of short-term bonds during the intraday period, but this upward trend weakened at the end of the New York session.

As of the end of the New York session, US bond yields for various maturities generally closed down. Among them, 2-year US Treasury yields fell 1.9 basis points to 4.839%, 5-year US Treasury yields fell 3.2 basis points to 4.44%, 10-year US Treasury yields fell 3.3 basis points to 4.417%, and 30-year US Treasury yields fell 3.4 basis points to 4.552%.

Overall, since a key inflation report released by the US Department of Labor last week showed core CPI cooling for the first time in six months, the US bond market has been in a state of rest. After the report was released, the market initially sought out the bond market because it was expected that the Fed would soon take measures to cut interest rates, but market activity in recent days has been mixed, as traders are still waiting to further confirm whether the Fed's interest rate cuts have officially returned to the established track.

Waller unexpectedly wasn't that “eagle” to focus on the Federal Reserve minutes tonight

US Federal Reserve Governor Waller, who is quite hawkish in the Fed's interest rate hike cycle, said on Tuesday that although recent data indicates that progress may have resumed in terms of inflation, he needs to see “a few more months” of good inflation data before starting to cut interest rates. Waller also believes that there is no need to raise interest rates any further.

Waller also gave his latest opinion on the schedule of interest rate cuts on the same day. He said that if data continues to weaken over the next three to five months, the Federal Reserve may consider cutting interest rates by the end of 2024. “If we get enough favorable data, then we can consider cutting interest rates at the end of this year or the beginning of next year.”

Waller's latest statement is clearly not as hawkish as some might expect. Evercore ISI Vice Chairman Krishna Guha said, “We interpret this as Waller is open to cutting interest rates in September, provided there is a more clear decline in inflation in the next few months.”

Stephen Bartolini, fixed income portfolio manager at T. Rowe Price, pointed out, “Some of Waller's remarks sound a bit dovish. His views on economic growth are a bit pessimistic, and he is inclined that the next step for the Federal Reserve is to cut interest rates. As a result, combined with the sell-off in the bond market over the past few days, yields have declined again.”

It is worth mentioning that the Federal Reserve will release the minutes of its April 30 to May 1 monetary policy meeting tonight (2 a.m. Beijing time on Thursday). The minutes may reflect the Fed's more concerns about higher-than-expected inflation in the first quarter, as the meeting was held before last week's CPI data declined.

The Federal Reserve hinted at its meeting in early May that it is still inclined to lower interest rates eventually, but acknowledged that disappointing inflation data may delay interest rate cuts for some time.

The minutes of the meeting may also provide more details about the Federal Reserve's plan to slow balance sheet reduction, which is worth watching for investors. The Federal Reserve announced at its latest meeting that it will slow down the pace of contraction from June 1, slowing down the monthly treasury bond holdings reduction scale from the current 60 billion US dollars to 25 billion US dollars. The monthly reduction in mortgage-backed securities (MBS) is still $35 billion.

Editor/Somer