Financial markets are responding favorably to news coming out of the United Kingdom (U.K.) this morning, which puts recently proposed plans to cut income taxes on ice indefinitely. This news marks a significant victory for bond vigilantes who have been emboldened recently by the surge in inflation across the globe. 10-year U.K. Gilt yields are more than 40 basis points (bps) lower this morning and down 125 bps since touching 4.5% in late September.1 Following 11 consecutive weekly increases in 10-year Treasury yields, U.S. investors are looking for some light at the end of the tunnel following this year’s record-setting bond market selloff. 2
This week’s economic calendar is relatively light with new housing data, including the Housing Starts release on Wednesday and the Existing Home Sales release on Thursday, taking center stage. 3 The Federal Reserve will welcome additional signs of cooling in the housing market as 30-year mortgage rates approach 7%, the highest level we’ve seen in 20 years. 4
1 Source: CNBC- U.K. GILT; as of 10/17/22
2 Source: CNBC- U.S. Treasury; as of 10/17/22
3 Source: MarketWatch- U.S. Economic Calendar; 10/17/22
4 Source: FreddieMac- U.S. Mortgage Rates; as of 10/17/22
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