Limit Up! 10th July 2025

Ian Reynolds July 9, 2025

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Overnight

Economic Indicators Released Overnight

Shocker China PPI shows deflation rate increasing. No wonder no-one has seen Xi for ages. Rumours of unrest within the CCP higher echelons and debt issuances having to be brought forward. Keep an eye on this.

Elsewhere the Bank of England's Financial Stability Report rang some bells but the benchmark US 10 year auction went well, which wasn't surprising as Bessent flipping to bills for now

The U.S. 10-year Treasury note auction held on Wednesday, July 9, 2025, was met with strong demand, signaling robust investor confidence.

Key 10 Year Auction Results

Total Offering: $39 billion
High Yield: 4.362%
Bid-to-Cover Ratio: 3.10, indicating that bids totaled 3.10 times the amount offered
Primary Dealer Allocation: 10.9%, below the recent average of 12%
Direct Bidders: 23.7%, the highest since 2014
Indirect Bidders: 65.4%, slightly below the typical 72.5%

The auction's high yield of 4.362% was slightly below market expectations, reflecting strong investor appetite. The elevated participation from direct bidders suggests increased domestic interest, while the slightly reduced indirect bidder share points to a modest decline in foreign demand. Overall, the auction's success contributed to a decline in Treasury yields, reversing a recent upward trend influenced by a stronger-than-expected jobs report the previous week.

This positive outcome alleviated some market concerns following a weaker 3-year note auction earlier in the week, indicating sustained investor confidence in U.S. government debt instruments.

Auction of 10-Year Debt Sees Strong Reception, Pulls Rates Lower [Barron's]

Treasury Yields Extend Declines After Strong 10-Year Note Auction [Wall St Journal]

The Federal Reserve released the minutes from its June 17–18, 2025, meeting yesterday, revealing a significant divide among officials regarding potential interest rate cuts this year.

FED Minutes Released

Divergent Views on Rate Cuts: While some officials believe inflation remains too high to justify rate cuts, others argue that the inflationary effects of recent tariffs may be temporary, supporting the case for easing monetary policy later in the year.
Limited Support for July Cut: Only a couple of policymakers, including Governors Christopher Waller and Michelle Bowman, expressed openness to a rate cut at the upcoming July 29–30 meeting.
Tariff-Driven Inflation Concerns: The committee discussed whether the inflation resulting from new tariffs is a one-time event or indicative of a longer-term trend, with this assessment influencing their policy decisions.
Economic Outlook and Policy Stance: Despite some improved clarity in the inflation outlook, the Fed emphasized a cautious approach to adjusting monetary policy, awaiting more definitive data on inflation and economic activity.

Overall, the minutes suggest that while the door remains open for rate cuts later in 2025, the Federal Reserve is adopting a cautious, data-dependent approach amid economic uncertainties.

Fed Minutes Show a Wide Divide on Rate Cuts This Year [Wall St Journal]

Federal Reserve officials say tariffs make interest rate cut unlikely [The Times]

Equities cheered in a muted way.

US Equities