Like Janus, summer sometimes shows two faces. Some years, nothing happens at all and you are well advised to go and relax in the sun without worrying too much about your investments. Other years, it is quite the opposite. In a narrow market, fluctuations can be exacerbated by turbulent news: remember the nearly 10% drop recorded in just a few weeks last year. Between tariffs and various conflicts in the world, this year was shaping up to be a hot one. However, for the moment, investors are showing remarkable composure (some would say blindness?). One of the main reasons cited is the promise of further monetary easing in September. Why? Because the job market is not as healthy as it seemed, pushing the probability of a 25-basis-point cut to nearly 90%. To drive the point home, inflation figures due on the 12th will need to show little sign of upward momentum. On this front, fears of price rises have been the subject of heated debate within the BOE, although the weakness of the UK economy ultimately prevailed as justification for another rate cut.
In the meantime, bond yields continue to fluctuate within narrow ranges, despite the latest auctions having been deemed disappointing. The US 2-year yield remains under downward pressure below the major resistance level of 4.07%, with the first hurdle at 3.855%. In Europe, the situation is also wait-and-see. The UK 10-year yield has been fluctuating between 4.51% and 4.86% for months and does not seem to be able to break out of this range for the time being, while its German counterpart, the Bund, is close to the upper limit of its range at 2.73%, with initial support at 2.60% to break through to open up the lower end of the range at 2.44%.
