March started with weaker data, ISM manufacturing and services both coming in lower than expectations especially the prices paid component, drawing the UST 10Yr bond yield down to a monthly low of 4.04%. Powells HH testimony was a masterclass of not rocking the boat, and NFP didn’t cause too much trouble before primary rent affected CPI and reversed the price action. The fed meeting in March bought time, with the dot plot retaining the 3 cuts by year end, and the likely starting gun in June, but reducing the 4 cuts in 2025 to 3. The month ended with Waller and Powell talking tough and rather blatantly spelling out a more reserved outlook on rate cuts. With markets closed for Easter, the price action spilled into the month of April.
The ex-US excitement over the month was provided by the BoJ dropping YCC and lifting rates to a positive corridor of 0bp to 10bp after 8 years of NIRP. The SNB was the “first cab out of the rank”, cutting rates by 25bp to 1.50% after an easier ride on the inflation rollercoaster than most.
The theme of the month and quarter has been the gradual waning of rate cutting expectations by the market to something more closely resembling central bank communiques. After an embarrassing episode of misdiagnosing transitory inflation, central banks appear to be more accurately recognising latent economic strength relative to the market.
The US 10y closed the month 5bps lower and 5s-30s swap was 1bps flatter.
