Friday Trend Continues as Rates Rise and Equities Fall

Rates continue to rise after last week’s Jackson Hole meeting. Swap rates and Treasury yields rose across the curve today as assets continued to reprice after Fed Chair Jerome Powell’s hawkish comments on Friday. Powell made it clear that the Fed is willing to let the economy fall into recession in order to control inflation, which went against expectations for a reversal in Fed tightening as early as next year. As a result, the 10-year yield rose ~6bps to 3.102%, while the 2-year rose ~3bps to 3.423%. Equities suffered for the second consecutive day, the S&P 500 falling 0.67% and NASDAQ down 1.02%.

Dallas Fed manufacturing index exceeds expectations. General business activity for manufacturing in Texas increased to -12.9 in August from -22.6 in July, despite the forecasted level of -24. Additionally, the new orders index was negative for the third consecutive month, which indicates a continued decrease in demand. Elsewhere, there were 3 and 6-month bill auctions today, where the bond yields were 2.91% and 3.30%, respectively.

Day ahead. Tuesday will be highlighted by several Fed speakers with Richmond Fed President Thomas Barkin set to make comments at 8:00 AM ET and New York Fed President John Williams to follow at 11:00 AM ET. Data on YoY home prices, job openings, and crude oil stock changes will also be released.