Market Commentary: Wednesday 13th August

Stocks rose to record highs after the US July CPI print came in at 0.2% MoM, consolidating the view that the Fed will have room to cut interest rates. The OIS market is currently pricing in a 94% chance of a 25-bps cut in the upcoming September meeting. The S&P 500 closed yesterday at 6,445.75. Treasury Secretary Scott Bessent hinted in an interview yesterday that the Fed should be open to a bigger 50-bps cut. The Fed has held rates unchanged this year in hopes of gaining more clarity on the impact of tariffs.

In Japan, the five-year government bond auction saw the lowest demand since 2020. This followed the BoJ’s signal for another rate hike by the end of the year, depending on the impact of US tariffs. Concerns over poor liquidity in the JGB market also contributed to the lacklustre demand.

Macro news releases are light today; however, there are several Fed members speaking: Barkin (1:00 pm), Goolsbee (6:00 pm), and Bostic (6:30 pm).

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