June 2024 Commentary
Market Overview
In June, at the half-year mark, U.S. Treasury yields ended higher than where they started at the beginning of 2024: the 2-year was at 4.71%, the 5-year was at 4.33%, the 10-year was at 4.36% and the 30-year was at 4.51%. Compared to Jan. 2, 2024, this constitutes an average increase of 40 bps across the tenors. In contrast to curve inversion—which historically has predicted a recession—the increase in Treasury yields usually reflects positive investor sentiment and higher mortgage rates influencing the bond market. At its last meeting in June, the U.S. FOMC decided to keep the federal funds rate unchanged, citing easing but little-changed conditions since March and hinting at one rate cut later in the year. The CPI was unchanged in May after rising 0.3% in April. For the 12-month period, inflation stood at 3.3%. The BLS report in June stated that the U.S. unemployment rate was 4.0%, little changed in May.
The overnight repo rate, a measure of market liquidity, ranged between 5.28%-5.47%, in line with May. On the equities front, the S&P 500® was up 3.47% in June, led by Information Technology, Consumer Discretionary and Communication Services.
Latin America continued its turbulent year. Banco Central do Brasil kept the Selic interest rate at 10.5%, quoting increasing household consumption, resilient economic activity and inflation not decelerating in line with the committee’s expectations. In Argentina, President Milei’s economic reforms passed the senate after his vice president cast the final vote. The reforms are a pared-down version of his original radical economic transition and still have to pass the house of deputies. Another win for Milei was China’s extension of a CNY 35 billion (USD 5 billion) currency swap line until July 2026, giving the economy more room for reform and growth.
In Europe, the Eurostat report released on July 2, 2024, stated that eurozone inflation was at 2.5% in June, down from 2.6% in May. In India, the HSBC India Manufacturing PMI rose to 58.3 in June from 57.5 in May, five points above its long-run average. The increase was influenced by new orders, output and buying levels with favorable business conditions.
