Up and Down Day for Treasury and Swap Rates

Swap rates and Treasury yields end the wild day little changed after climbing as much as 15bps. Manufacturing and services activity declines had been the initial impetus for last month’s recession fears, which had depressed the long end of the curve and pulled the 10-year Treasury yield below 3%. But today’s ISM services activity index pushed back on that notion, and a surprise increase in the index to 56.7 initially sent the 10-year as high as 2.85% before it moderated into the close, ending the day back down near 2.70%. Meanwhile, U.S. equities had a strong day, the Nasdaq Composite and S&P 500 climbing 2.59% and 1.56% respectively.

OPEC agreed to a slight increase in production at today’s meeting. OPEC will be expanding production by an additional 100,000 barrels a day. Their meeting also noted that there is a chronic underinvestment issue across all levels of the energy value chain, which has been a hurdle for worldwide supply. While today’s decision is a small increase, it is a positive sign to see that OPEC is responding to overall macro-economic conditions, not just reaping the benefits of high oil prices from the supply shortage. OPEC will be monitoring market conditions to reduce the probability of demand destruction that comes with a potential recession. 

Day ahead. Data-wise it’ll be a quiet day tomorrow, with only initial jobless claims and continuing claims on the calendar ahead of Friday’s nonfarm payrolls report. The Fed’s Loretta Mester will make public remarks at noon ET.