Financial Services Association, November 25 (Editor: Xiaoxiang) With Thanksgiving approaching, the US financial market is about to usher in a short trading week this week: US stocks and US bonds will all be closed all day on Thursday; Friday will close early.

However, judging from the news, this short trading week may still not be calm: the minutes of the Federal Reserve's November meeting and the PCE price index, the Federal Reserve's most popular inflation indicator, will be released this Tuesday and Wednesday local time, and may be expected to cause more waves in the market at the end of November.

Currently, industry insiders generally expect that the latest inflation data to be released this week may show that US price pressure is still stubborn, which will reinforce the Fed's cautious attitude about future interest rate cuts.

According to the median estimate from a survey of economists, the US PCE price index may rise 2.3% year on year in October, up from 2.1% in September; the October core PCE price index, which excludes food and energy, is also expected to rise 2.8% year on year — this will be the biggest year-on-year increase since April.

The report is also expected to reveal strong household spending and steady revenue growth in the US at the beginning of the fourth quarter. Personal expenses, not adjusted for price changes, are expected to increase 0.4% month-on-month, compared to 0.5% last month. Personal income is expected to increase 0.3% month-on-month, in line with the previous value.

Although Fed policymakers will receive another set of inflation data — November CPI — before the next interest rate meeting on December 17-18. However, in terms of their preferred PCE data, this week's data will be the last month's indicator before the conference. Currently, as Trump continues to promise to promote policies such as tax cuts and additional tariffs after winning the election, Wall Street is generally worried that the inflationary pressure on the US will increase again in the next year.

This has also led to a continued decline in industry insiders' expectations of the Federal Reserve's interest rate cut. According to CME's US Federal Reserve's observation tool, interest rate market traders currently expect the probability that the Fed will cut interest rates by 25 basis points next month to 50.9%, and the probability of not cutting interest rates is 49.1%. The two are almost the same.

The Federal Reserve will also release the minutes of the November interest rate meeting this Tuesday (Wednesday at 3 a.m. Beijing time) local time. Although the Federal Reserve's decision to cut interest rates by 25 basis points earlier this month did not go beyond people's expectations, it is expected that the description of inflation data, economic prospects, and the pace of future interest rate cuts in the minutes of its latest meeting will still receive a lot of attention.

HSBC economists pointed out in the report that the minutes of the Federal Reserve's November meeting may also show some policymakers' discussions on the possible economic impact of the US election results.

Judging from recent trends in the US Treasury bond market, after two months of continuous sell-off, US bond prices finally showed some signs of stabilization last week. This is mainly due to the fact that the current high yield on US bonds is beginning to attract some investors.

Take the 10-year US Treasury yield, which is the “anchor of global asset pricing,” as an example. After breaking through 4.5% on November 15, a wave of large-scale purchases temporarily stopped this term yield from continuing to rise — it has not broken through this level since then. The 10-year US Treasury yield closed at 4.4% last Friday, down 3 basis points from the previous week's close.

The fund manager of Pacific Investment Management Corporation (PIMCO) said that when the yield on US Treasury bonds far exceeds 4%, it is quite attractive in itself. And since treasury bonds are now generally the opposite of stock price trends, US bonds are also beginning to play their traditional role in hedging the stock market downturn.

PIMCO managing director and multi-asset portfolio manager Erin Browne said in an interview that US Treasury bonds are “an asset with very low volatility and high return,” adding that if 10-year US Treasury yields rise back to 5%, she “will be really interested in buying more actively.”

Felipe Villarroel, portfolio manager at asset management firm TwentyFour Asset Management, believes that the fair value of 10-year US bonds is 4.25% to 4.5%, but he added that since “the inflation situation has not deteriorated so seriously recently,” and investors are yet to confirm whether Trump's policies will drive prices to rise, “volatility will continue.”