Bond Traders Reprice Rate Out­look as Growth Slips

The Bond Buyer - - Market News -

Bond and money mar­ket traders around the world are re­assess­ing the pace of in­ter­est rate tight­en­ing amid signs global growth is sput­ter­ing.

Traders were cut­ting back bets on Fed­eral Re­serve hikes in 2019 even be­fore dovish re­marks from Chair­man Jerome Pow­ell opened the door for a po­ten­tial pull­back next year. Min­utes from the Fed’s meet­ing ear­lier this month also set the stage for more flex­i­bil­ity.

Cen­tral banks may have good rea­son to turn more dovish. The In­ter­na­tional Mone­tary Fund down­graded its fore­cast for world growth last month, and warned this week that the out­look may have got­ten even worse. That’s been re­flected in in­creas­ing fi­nan­cial mar­ket tur­bu­lence, with stocks sink­ing in the fourth quar­ter and credit spreads widen­ing.

Mean­while, fall­ing oil prices are tam­ing in­fla­tion ex­pec­ta­tions.

U.S. in­ter­est-rate pric­ing shows the mar­ket is ex­pect­ing a 25 ba­sis-point hike next month, and no more than one ad­di­tional in­crease next year. That’s less than the con­sen­sus among an­a­lysts and below the Fed’s own fore­casts.

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