GGMA Markets Briefing: Bond Market Calls Warsh's Bluff as the BoE Decides
The Federal Reserve held at 3.50 to 3.75% on a 9-3 vote, and the bond market spent the rest of the session repricing what that means. Logan, Hammack and Kashkari dissented for a quarter-point rise, one more than the research consensus expected, while the statement was otherwise unchanged from June (BBG). The reaction concentrated in the press conference: the chair declined to explain the hold or commit to acting if inflation stays high, argued that higher long-term market rates showed markets doing the Fed's work, and within hours JPMorgan had pulled its hike call forward from the second half of 2027 to this December (BBG). One strategist commented the market is calling his bluff, and a companion read of the rout put it as a warning that tough talk is not enough (BBG).
As a result, two-year yields fell on relief while the thirty-year yield surged to its highest since 2007 (BBG) (CNBC).
The pressure spilt over to Asia, with thirty-year bond prices in Australia, New Zealand and Japan falling in sympathy (BBG). Apollo's Torsten Slok said there is very little to hang your head on in these markets and that the Fed's abandonment of guidance is fuelling historic bond-market volatility (BBG). Jeffrey Gundlach said: the front end thinks the Fed is taking its time, and the long end is the bond market vigilantes demanding action to match the rhetoric (CNBC). The STIR markets now put roughly 67% on a September hike and 35bps by December (BBG). Treasury futures extended the move overnight, down 0.5%. The Japanese ten-year yield was little changed at 2.81% before the Bank of Japan, a move of 0.1 basis point, while super-long Japanese yields climbed with their American counterparts (BBG). The week's two-year sale drew demand below its twelve-month average (BBG), and the latest weekly data showed foreign investors selling Japanese bonds at roughly eight times the prior week's pace. (BBG).
Asian stocks traded lower and choppy, with the Fed leaving markets uncertain on rates (Reuters). Chinese shares fell 2.0%, the Nikkei lost 1.4%, Australia fell 1.1%, and the emerging-market index eased 0.4%, while Korea whipsawed, rising as much as 5.5% before fading, after Samsung's chip unit beat estimates and the authorities capped retail access to leveraged ETFs following Wednesday's emergency meeting (BBG). The Kospi is down 33% in July, its worst month on record, and the regional rotation ran out of technology and into real estate and energy shares (BBG). One Seoul manager put the constraint plainly: there are no buyers in the market (BBG).
In currencies, the dollar index was little changed after softening on the decision; the yen sits at 163.48 against the US dollar ahead of tomorrow's Bank of Japan meeting, and the kiwi firmed against the US Dollar 0.2% on the business-confidence surge. The Korean won firmed 0.3% even as the equity unwind continued, still the clearest sign the stress is contained in the stock market.
Commodities turned through the morning. WTI, 0.2% lower at the morning capture, moved back higher as the session progressed (BBG), the earlier dip having followed the United States struck dozens of Iranian targets overnight, command centres, missile and drone facilities and maritime capabilities among them, in response to Tuesday's attack on US forces in Jordan, with the Hormuz-passage talks dead and the conflict back in its escalation phase (WSJ). The slip had come as tankers continued to ply the conflict zones (Reuters), and the deadlock over the strait is reported to be settling in for months rather than weeks (BBG). Gold eased 0.5% to 4,045.24 dollars as real yields rose, copper added 0.5% as the Fed's pause eased demand concerns across base metals (BBG), and Bitcoin gained 0.7%.
The overnight data run belonged to the South Pacific. Australian building approvals rose 7.2% in June against expectations of a 0.5% fall and a survey range topping out at 3.0%, while second-quarter import prices jumped 5.7% against a flat consensus, the energy shock arriving in the trade data two days after the CPI undershoot argued the other way. New Zealand's ANZ business confidence surged to 56.1 from 36.6. Japan's consumer confidence rose to 34.9 against a 34.2 consensus and 33.8 previously, and the government cut its fiscal-year growth forecast to 0.9% from 1.3% on oil while raising its inflation view, the same morning its central bank is reported to be considering a growth upgrade (BBG), while the prime minister pressed ahead with a temporary sales-tax cut on food (Channelnewsasia).
Central banks own the day. The Bank of England decides at 13:00 CET, with every surveyed economist expecting a hold at 3.75%, a 7-2 vote anticipated with Pill and Greene dissenting and Mann the risk of a third, plus a full forecast round and the annual quantitative-tightening review, which one bank estimates has added 15 to 25 basis points to gilt yields (LS). The scenario framing from May is the live question, with one house arguing the economy sits in the middle scenario, a hold with a tightening bias on a partially open Hormuz (LS). In the euro area, the ECB's wage tracker showed negotiated pay slowing to 2.6% this year with no second-round signs, Lagarde's own framing, yet the market assigns a 93% probability to a September rate rise regardless (WSJ). In Australia, the market assigns only a 3.5% chance of a hike for the RBA in August after Hunter's balanced overnight remarks (BBG).
The corporate tape split the AI trade in two after the close. Microsoft rose 8% in late trading on accelerating cloud growth, a jump in paid Copilot users and a lower capital-spending forecast for the calendar year, while Meta fell around 10% as free cash flow collapsed, the spending floor rose and third-quarter guidance disappointed (WSJ). SK Hynix, at the centre of the Korean rout, told investors it has no plans to announce new production facilities, the same discipline the market rewarded in Redmond hours later (Nikkei Asia). The Nasdaq entered a technical correction on Wednesday before its futures steadied (BBG). Elsewhere on the tape, Qualcomm gave a weak profit forecast on component shortages and rising costs, Arm's sales outlook underwhelmed, and Starbucks raised its annual guidance after a beat (BBG). Among Europe's morning reporters, BMW's carmaking profit beat expectations, Societe Generale raised its profitability target and announced a €1.5 billion buyback, Sanofi beat and nudged its guidance higher, BBVA and ING topped estimates, and Schneider Electric raised its sales and profit guidance, while AB InBev's volume growth narrowly missed and Adidas missed (BBG).
Ahead today: the Bank of England at 13:00 CET, with the vote count, the scenario choice and the quantitative-tightening review the three things that can move September pricing, which now carries just under a 60% probability of a hike. At 14:30 CET, the United States releases second-quarter GDP and June core PCE, the first inflation data the Fed's dissenters can use, with the advance GDP range unusually wide on an AI-import distortion. Euro-area flash GDP and the German and Spanish inflation prints fill the morning. Apple and Amazon report after the American close into the market's new capex scoring, and the Bank of Japan concludes tomorrow with the government and central bank telling opposite stories about the same economy.
Time Stamp: 30 July 2026, 08:15 CET