Market Reaction to Fed Chair Powell: On Wednesday, markets reacted to speculation about Fed Chair Powell’s potential removal. Despite low probability, the market demonstrated a risk-off response with short-end Treasury yields falling, the dollar decreasing, equity markets dropping, credit spreads widening, and long-end Treasury yields rising.

PPI Was Tame: The Producer Price Index (PPI) showed subdued inflation in June, with a 0.0% month-on-month outcome and a 2.3% year-on-year rate overall. Components affecting the Fed’s preferred inflation measure suggest a 0.2% month-on-month reading, with mixed results from various sectors like airline fares and healthcare.

Treasuries Like the PPI Report: Treasuries reacted positively to the PPI report, calming the real yield back towards 2% and the 10-year yield around 4.45%. Despite ongoing issuance pressure and a potential steeper curve, front-end rates are expected to decrease, while long-end yields may remain elevated or rise in the coming months.

Thursday’s Events and Market Views: The UK will open with inflation and earnings data, while the US will release retail sales, export and import prices, and jobless claims. Spain and France will conduct bond auctions, with focus on budget discussions. This information is for informational purposes only and does not constitute investment advice.

Read more at Investing.com: It’s Confirmed, Long-End Yields Rise if Powell Were to Go