After taking a break on Monday, the US bond market resumed its rise on Tuesday and pushed the yield of benchmark 10-year US treasury bond bonds to the lowest level since the summer. The US job vacancy data released on the same day further confirmed that the US labor market is cooling down, adding a new fire to the interest rate reduction bet in the interest rate market.
Market data shows that the yield of US Treasury bonds across all maturities fell overnight. Among them, the 2-year US Treasury yield fell 6.3 basis points to 4.583%, the 5-year US Treasury yield fell 7.5 basis points to 4.141%, the 10-year US Treasury yield fell 8.9 basis points to 4.17%, and the 30-year US Treasury yield fell 11.6 basis points to 4.299%.
Currently, the 10-year US Treasury yield has reached its lowest level since August 31st.
In terms of the stock market, affected by the further decline in US bond yields, although the S&P 500 index and Dow Jones index weakened on Tuesday, the Nasdaq, represented by technology stocks, still rose strongly. As of the close, the Nasdaq rose 44.42 points, or 0.31%, to 14229.91 points; The S&P 500 index fell 2.60 points, a decrease of 0.06%, to 4567.18 points; The Dow Jones Industrial Average fell 79.88 points, or 0.22%, to 36124.56 points.
Looking back at last night's US stock market, an interesting highlight is that the stock with the largest increase in the S&P 500 index was actually a bond trading company. This further highlights the recent significant rebound in the bond market, which has attracted increasing attention from American investors and is also having a huge impact on the stock market.
As of the close of the day, MarketAxess Holdings led the S&P 500 index up by 5.3%. The company is an international financial technology company, whose main business is to provide an electronic auction trading platform for bonds used by financial institutions, as well as market data and post trading services.
Previously, the company informed investors that its electronic bond trading platform had a record breaking bond trading volume of $303.3 billion in November. The daily trading volume increased by 9.3% compared to the same period last year, and significantly increased by 13% compared to before the bond market began to rise in October.
In other areas of the US stock market, large technology stocks also generally strengthened overnight - among the seven tech giants that dominated the market's rise this year, except for Meta, which fell by 0.5%, all others rose. Among them, chip manufacturer Nvidia led the rise, with a growth rate of 2.3%. Apple's stock price also rose 2.1%, surpassing $3 trillion in market value for the first time since early August.
The US job market shows signs of cooling down
In recent weeks, weak economic data and comments from Federal Reserve officials, including Chairman Powell, have intensified expectations that the Fed has ended its current interest rate hike cycle and will begin cutting rates as early as March next year. And overnight, a latest report on the US job market seemed to confirm this.
The US Department of Labor announced on Tuesday that the number of vacant positions at the end of October reached its lowest level since March 2021. The job vacancies in October decreased by 617000 to 8.7 million. This level is far below the historical peak of 12 million set in March 2022, although still higher than before the outbreak began.
The decrease in job vacancies, accompanied by a slight increase in unemployment rate this year, indicates that Americans are taking longer to find new jobs and salary growth is slowing down.
Data shows that the resignation rate in the United States remained unchanged at 2.3% month on month in October, but has been on a downward trend since reaching 3% in April 2022, confirming that the wave of resignations that emerged in the early stages of the pandemic recovery has subsided. Economists believe that a decrease in the resignation rate indicates a weakening of employee confidence in the job market, or that they are more satisfied with their current job.
Ian Lyngen, capital market analyst of Bank of Montreal, said: "In general, the latest employment data continues to dominate. treasury bond bonds continue the bullish price trend. The market is paying attention to the ADP report released on Wednesday. There will not be much change in the macro before this."
Evercore analyst Krishna Guha pointed out that the employment data confirms that the Federal Reserve has made substantial progress in restoring normalcy to the labor market, but this will be seen by decision-makers as a more desirable rebalancing rather than an intensified downside risk.
Guha said, "In this situation, we are wary of placing too many bets on market rate cuts. We find it difficult to imagine a rate cut before June without an economic recession, and in the scenario of a soft landing, we believe that three rate cuts next year is the basic scenario (currently priced at five in the market)."
It is worth mentioning that as US bond yields continue to weaken, some industry insiders are also wary of whether the bond market performance has become overbought. Gennadiy Goldberg, an analyst at TD Securities, said in an interview that the rise in the US treasury bond bond market has approached a worrying level, especially at the long end of the interest rate curve.
He pointed out that there may have been some overbought situations in the current US bond market, and if the yield further decreases, he may take some strategic adjustments.