Sights on September

·19 min·1 clip

Ian Lyngen says the September rate cut debate will soon shift to whether it's 25 or 50 basis points.

In this episode of Macro Horizons, hosts Ian Lyngen and Ben Jeffery provide a weekly update on U.S. fixed income markets. They open by noting the treasury market digested a disappointing July employment report, with consensus landing on a 25 basis point Fed rate cut in September. The hosts emphasize that the key weakness came from downward revisions to May and June jobs data, providing three clear data points of labor market softness. They expect this to justify an insurance cut in September, shifting focus to October and December meetings. The market prices a 90% probability for a 25bp cut, but debate may shift to 50bp if data disappoints further. The hosts discuss their base case of 25bp, noting it would require significant labor market downgrades and benign inflation prints. They mention the Fed's SEP and dot plot in September will offer forward guidance. The episode touches on President Trump's announcement to replace the head of the BLS after the jobs report, highlighting institutional challenges with data accuracy post-pandemic. Analysis of the 10-year refunding auction shows it tailed but didn't trigger sustained weakness, indicating subdued bond bearish sentiment. The hosts argue that supply and term premium concerns have diminished as the Treasury focuses on bill auctions. They link weak labor markets to disinflationary pressures, containing yields. Global growth worries, including a Bank of England cut, reinforce a focus on fundamentals over supply. The outlook expects yields to drift lower, with 10-year yields forecast at 3.85% by end-2025 and 2-year at 3.25%, implying a 60bp curve. They favor curve steepening trades anchored to the two-year sector. The week ahead includes July CPI, PPI, import prices, and retail sales data, which will shape rate cut expectations. The hosts note the wealth effect from equities may cushion consumption downside. The episode ends with thanks to listeners and a mention of the approaching Jackson Hole symposium.

As heard by us

A desk-side September cut debate that treats payrolls, CPI, and the Fed's patience as one story.

Macro Horizons keeps the September rate-cut debate centered on the disappointing employment report and the next run of data. It tracks how two more CPI prints and the August employment report still leave a 25 basis point cut as the baseline, while 50 basis points remains…

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Why you'd press play

September cut odds, BLS revisions, and one dry joke about the market's favorite rate-cut debate.

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