BoE Market Intervention Fuels Massive Treasury Rally  

Treasuries rally on BoE intervention despite hawkish Fed. Treasury yields plummeted today after the 10-year yield briefly surpassed 4% for the first time since 2008. The rally was ignited by the BoE’s market intervention, in which it committed to buying long-dated UK bonds in order to calm markets. The move came in spite of hawkish Fed commentary from Raphael Bostic and Charles Evans, in which the two warned that more rate-hike pain is yet to come. The 10-year yield fell ~21 bps to 3.73%, while the 2-year yield fell ~15bps to 4.14%.

Inventory data points to slowing economic conditions. Wholesale Inventories, a measure of the value of unsold goods held by wholesalers, increased 1.3% in August MoM, surpassing analyst expectations of 0.4% growth. Retail inventories were also elevated, up 1.4% MoM vs. 1.0% consensus estimates. Viewed alone, increased inventories can imply positive business expectations for elevated future demand. Conversely, the figures can point to reduced demand as consumers and businesses purchase less in the face of rising rates and tighter liquidity.

Day ahead. Fed members James Bullard, Loretta Mester, and Mary Daly are all set to make public comments tomorrow. Reports on quarterly GDP growth rate and price index are set for release at 8:30 AM ET.