It’s been a challenging summer for the Chinese real estate market, as the difficulties faced by Chinese developers continue to cast a shadow over the industry.

Mixed progress on inflation (CPI, PPI), the rise in commodities prices, and the ongoing US Treasury auctions continue to exert pressure on bonds.

What a week it has been for the fixed-income market, as long-end rates surged and EM central banks initiated their easing cycle!

Central banks are diligently proceeding with their anticipated monetary policy tightening, with one exception: the Bank of Japan, which appears inclined to alter its approach to yield curve control. Despite the summer season, their commitment remains unwavering!

This week witnessed a stable fixed income market, marked by lower rate volatility and flat performance, all leading up to a significant week ahead. The Federal Reserve, Bank of Japan, and European Central Bank are set to deliver their latest decisions on monetary policies.

US Treasuries experienced their largest weekly inflows in 16 weeks, totaling $16 billion, as the release of CPI data prompted short sellers to cover their positions. The price action was significant, resulting in a 1.5% gain for US Treasuries bonds, making it one of the best weeks in 2023.

This week witnessed the clearance of major resistances in the bond market, as the 2-year US Treasury yield surpassed 5%, while the 10-year and 30-year yields rose above 4%.

This week, central bank officials delivered a strong and unified hawkish message, signaling the likelihood of higher interest rates for an extended period.

The week witnessed surprising moves by central banks (Norges, BoE), driven by persistent concerns over inflation.

FOMC decisions and US CPI could set the tone for this summer. Currently, the 10-year yield is below the channel line at around 3.80%, but if it rises above this level, risks will start to shift to the upside on rates.