A solid employment report showed that 280,000 jobs were added in U.S. in May, while strong retail sales and a rise in consumer sentiment suggest that consumers are finally spending some of the windfall from previous oil price falls. Overall, the data indicate that economic activity will re-accelerate in Q2 following a soft first quarter.
Weak US industrial production figures, however, indicate that past dollar strength may still be having an impact on this sector, while the FOMC was a little more dovish than anticipated with the 'dot plots' pointing to a slower pace of tightening than previously indicated following the first hike. The US 10-year Treasury yield rose to just shy of 2.5%, but eased back to around 2.4%.
"Significant market volatility has led us to reassess our central view for key bond yield forecasts. Based on macroeconomic and policy rate assumptions, we look for the US 10-year yield to rise to 2.7% by the end of the year and the UK equivalent to increase by a similar magnitude to 2.5%." estimates Lloyds Bank
