(Bloomberg) — Stocks joined bonds higher after a solid $39 billion Treasury sale triggered speculation that Wednesday’s inflation reading will help make the case for the Federal Reserve to cut rates this year.
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Big tech led gains in equities as Apple Inc. jumped to a record. Banks remained under pressure, with giants like JPMorgan Chase & Co. and Citigroup Inc. getting hit. Treasury yields fell across the curve. Demand in an auction of 10-year debt was strong, with the bid-to-cover ratio of 2.67 being the highest since February 2022 — the month before the start of the tightening cycle.
10-Year Treasury Demand Skyrockets at June’s $39 Billion Auction
“The US Treasury market is finally smiling after many, many months with at best mediocre auctions,” said Peter Boockvar at the Boock Report. “Is the market sniffing out a softer CPI tomorrow? Worried about economic growth?”
The S&P 500 hovered near its all-time high. US 10-year yields fell seven basis points to 4.40%. Treasuries were also bid as unease over political upheaval in Europe intensified, triggering a rout in French bonds.
Investors braced for amplified swings at a time when volatility has been relatively subdued. With the Fed widely expected to hold borrowing costs at a two-decade high on Wednesday, there’s less certainty on officials’ quarterly rate projections, known as the “dot plot.” Hours before that, traders will get a fresh read on inflation — which is forecast to show prices are cooling, but still running ahead of the central bank’s comfort zone.
“We expect Fed Chair Powell and company to maintain a position that stresses potential rate cuts remain contingent on the committee seeing further progress made on bringing down price pressures,” said Anthony Saglimbene at Ameriprise.
A survey conducted by 22V Research showed most investors polled are betting both the consumer price index and the Fed decision will be “risk on.”
“63% of investors believe that the Fed will first cut because of a soft landing and that inflation is on a Fed-friendly path…
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