Treasurys Rally Amid Further Evidence of Slowing Economy  

Housing prices get hit by policy tightening. Treasurys fell across a flattening curve today, the 2-year yield decreasing ~3 bps to 4.47% and the 10-year yield falling ~14 bps to 4.10%. The rally was partially spurred by home price growth data, which revealed a slowing market as high borrowing costs continue to hamper demand. While a 75 bp hike is all but locked in for November, speculation continues to circulate regarding a potential Fed turnaround by year-end. Equities continued to benefit from this sentiment, the S&P rising ~1.63% and NASDAQ rising ~2.25% on the day. 

Traders build bullish bond positions. Traders are becoming bullish on Treasurys- at least that’s according to a JP Morgan Treasury survey that showed that clients are taking the biggest net long positions in over two years. This data reinforces the view that we may be approaching a near-term peak in interest rates, especially when coupled with the beginnings of reduced economic activity.

Day ahead. Retail and wholesale inventory data will be released at 8:30 AM ET. New home sales data for the month of September will follow at 10 AM ET.