Daily Market Color August 28, 2023China Woes, UST Auction Yields High Rates fall as a big week awaits. Swap rates and Treasury yields backtracked slightly from Friday’s Powell-spurred rise, as both the 2y and 10y UST yields fell 3bps to 5.05% and 4.20%, respectfully. Concerns about China’s weakening and its impact on global economies stayed in the headlines, despite stimulus measures announced over the weekend. Meanwhile, GDP, PCE, nonfarm payrolls, unemployment, and personal income and spending figures await, key inputs to the Fed’s data-dependent model. China pessimism continues after 10 minutes of hope. China’s economic struggles furthered today despite Beijing’s weekend announcement of various stimulus measures, which saw China’s benchmark CSI 300 Index rally sharply before falling throughout the remainder of the session. The stimulus included a cut in stamp duty on stock trades, the first such action since 2008, and an increased focus on slowing the pace of IPOs, an effort to lure investors to the stumbling equities market. The moves saw the CSI 300 surge up 5.5% early in the day, only to quickly regress lower and end the session just 1.17% higher. Treasury auctions draw 15+ year high yields. Increasing federal deficits and funding needs have seen supply of USTs spike, with larger than expected auctions continuing since the Treasury announced the supply increase in late July. Today’s slate featured $45B of 2y USTs and $46B of 5y USTs, both of which saw low demand and yields as high as any since the late 2000s. The 2y auction was awarded at 5.024% and will pay interest at 5%, the highest since 2006. Meanwhile, the 5y auction was awarded at 4.40%, the highest since 2007. The elevated levels are a broader indicator of just how historic the current environment is, with Powell’s comments on Friday the latest headline to drive a UST sell-off.