Rates Continue to Decline After Sell-Off

Treasury yields and swap rates decline in volatile session. The bond selloff that has dominated headlines appeared set to continue for much of the day, the 10-year Treasury yield rising as much as four basis points to hit 1.55% at one point. That move was quickly reversed though, and swap rates and Treasury yields would decline into the close to end the day lower for the second straight session- the 10-year Treasury yield declining to 1.49%. U.S. equities ended the worst month since March of 2020 on a low note- the S&P 500 declining 1.19% on the day while the tech-heavy Nasdaq fell 0.43%.

U.S. initial jobless claims increased for the third straight week. Jobless claims rose to 362,000 for the week ending 9/25, marking a seven-week high and surpassing economists’ estimates of 330,000. The level of claims is still near pandemic lows, but the last time the Labor Department reported three consecutive weeks of increasing claims was April 2020.

Congress continues to deliberate over spending plan, upcoming debt-limit deadline. President Biden’s $3.5 trillion spending plan has hit several roadblocks in Congress. The progressive caucus in the House has vowed not to vote on the current infrastructure bill if there are no assurances from the Senate that it will be part of a larger spending package. In the Senate, West Virginia Senator Manchin and Arizona Senator Sinema have both pushed back on the $3.5 trillion price tag of the spending plan, Manchin announcing today he wants to see spending cut to $1.5 trillion. On the upcoming debt limit deadline, Treasury Secretary Yellen commented that the Treasury may have a “few days” after her initial October 18^th deadline before cash runs out. Secretary Yellen also said she would be supportive of a permanent repeal of the debt limit.