Bond market rally drives yields past Wall Street’s end-2024 targets

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Good morning.

A global rally in government debt has already driven yields past many Wall Street targets for the end of 2024, highlighting how recent market moves have taken analysts by surprise.

When banks began sending out their annual forecasts to clients a month ago, they were broadly united in the view that government bonds would rally next year as interest rates start to fall.

But many forecasts have already been met more than a year early, as bigger than expected falls in inflation and a changed outlook from the US Federal Reserve have persuaded investors to bring forward their bets on rate cuts.

Yields on benchmark 10-year US Treasuries have declined by almost a percentage point since the end of October on rising expectations that the Fed will begin cutting rates as soon as March.

“The Fed has made a very quick pivot,” said Bank of America rates strategist Meghan Swiber. “It just speaks to how volatile the market has been.”

Keep reading for more on what analysts expect in the coming year.

And here’s what I’m keeping tabs on today:

The Restaurant Group: Apollo Global Management’s acquisition of the company, which owns British chain Wagamama, is expected to be completed.
Economic data: The US reports final third-quarter gross domestic product figures, while the UK delivers an update on public finances for November.
Monetary policy: Turkey’s central bank announces its interest rate decision.
Football: The European Court of Justice delivers its final verdict on the validity of the European Super League, an attempted breakaway competition launched by a dozen top clubs in 2021.

Five more top stories

1. Belgium suspected for years that a Flemish far-right politician was a Chinese intelligence asset but were unable to prosecute him, the country’s justice minister told the Financial Times. Frank Creyelman was used as an asset by Chinese spies for more than three years, an investigation last week by the FT, Der Spiegel and Le Monde revealed. Here’s why authorities could not press criminal charges against him.

2. The UK and US are tightening rules around the shipping of Russian oil in an attempt to make it harder for Moscow to circumvent the so-called price cap, a policy aimed at squeezing the Kremlin’s revenue from crude. Crude oil sales from Russia have routinely been priced above the $60 cap since the summer. Here’s how the new rules aim to change that.

Russian economy: Ahead of Vladimir Putin’s re-election bid, the Kremlin is fighting to curb inflation by lowering the price of eggs and putting western company exits on hold.

3. Donald Tusk’s administration has taken Poland’s public television news channel off the air, with the prime minister’s incoming government dismissing the heads of the state media agency. The abrupt shutdown of TVP Info’s 24-hour news programming followed Tusk’s pledge to dismantle state TV, which he said operated as a mouthpiece of the rightwing former government.

4. Warner Bros Discovery and Paramount Global are in early talks to merge, with the chiefs of both companies discussing a possible deal over lunch at Paramount’s New York offices this week, according to people familiar with the matter. Here are more details on the possible media deal.

5. The use of £235mn in savings from HS2 to repair potholes in London has drawn criticism after it was promoted as part of “Network North”, Rishi Sunak’s plan to redirect high-speed rail money to local transport upgrades. Labour mayors said money that would have been invested in the north, where the prime minister had cancelled parts of the rail project in October, was now being spent in the more prosperous south of the country.

More UK politics: Ireland will launch legal action against the UK over legislation that would offer an amnesty from prosecution for atrocities committed during Northern Ireland’s Troubles conflict, prompting a sharp riposte from London.

The Big Read

India has been in the global spotlight this year. The country has surpassed China by population and is being touted as an alternative investment destination in response to western tensions with Beijing. Narendra Modi, India’s 73-year-old leader, will be seeking a third term in office in polls due early next year. In an exclusive interview, the prime minister discusses his country’s growing relationship with the US and responds to claims that he represents a threat to democracy.

We’re also reading . . .

Peak oil: As resilience to supply disruption grows and the energy transition speeds up, Opec+ is struggling to hold the world to ransom with high energy prices, writes Chris Giles.
UK Conservatives: Voters will draw the obvious conclusion about a party that cannot or will not defend its record in office, writes Robert Shrimsley.
La Défense: Sales of office buildings in Europe’s largest purpose-built business district on the outskirts of Paris have collapsed this year as the property downturn hits the area twice as big as London’s Canary Wharf.

Chart of the day

The Bank of England is heading into the new year facing a barrage of complaints that it is proving too slow to recognise the marked retreat in UK inflation. Official data yesterday revealed a steep dive in the rate of consumer price growth to 3.9 per cent last month, much lower than economists expected.