Bonds Fail to Gain Ground on Heightened Fed rate Cut Views

Behind the market’s upbeat tone, a heavy dose of caution lingers in consumer behavior and global fixed-income sentiment.

Key Takeaways

• Tariffs Cause A Tourism Boom in Canada: As we said at the time that, when President Trump waged his tariff war against Canada and insulted many (though clearly in jest) north of the border with his “51^st state” remarks, what he ended up doing was sparking a travel and tourism boom in the Great White North that is practically without precedent. Canadian domestic tourism expanded by nearly +11% in the second quarter, a near-tenfold multiple over total economic activity, to 90.6 million trips within the country.

• “Resilient” Consumer Boosts Dollar Tree Sales: It may well be true that the American consumer is resilient, but we should also ponder what it means when Dollar Tree boosts its profit outlook because roughly three million more households visited its stores in the latest quarter compared to a year ago, with 60% of that bulge coming from high-end consumers (those earning more than $100k annually).

• JGB Yields Drive a Cautious Bond Market: Bond markets, both in the U.S. and abroad, are trading on the defensive side, especially in Japan, where the 10-year JGB yield has moved up by +4 basis points to 1.93% (the highest since 2007). Not even the news today that Eurozone retail sales came in flat in October could muster much of a response in the global fixed-income space.