Daily Market Color

Consumer Sentiment Flattens the Yield Curve

Decade-low consumer sentiment sends rates tumbling

U.S. consumer sentiment unexpectedly fell to its lowest since 2011 in August, with the economic outlook and personal finances being among the more significant concerns for consumers. The surprising report sent yields lower across a flattening curve with the 10y UST yield dropping 8 bps to close the week at 1.28%. The rate rally sent the 2y10y spread down 7 bps on the day to close at 106bps. Equity markets seemed to shrug off the data, focusing more on the bevy of strong earnings releases this week – the DJIA and S&P 500 both closed at record highs for the fourth consecutive session.

Fed members speak on policy expectations

With a series of robust inflation prints and improving labor market data, we’ve recently heard from several Fed members on their expectations for monetary policy tightening. Rhetoric from the FOMC will be closely watched in the coming weeks, especially at the Jackson Hole policy symposium scheduled for the end of the month. A summary of the latest commentary includes:

Data to watch next week

Investors will get more data on the state of pricing pressures and economic outlook with the Empire and Philadelphia manufacturing surveys being released on Monday and Thursday, respectively. July retail sales are released on Tuesday and housing starts will print on Wednesday. The FOMC minutes will be available on Wednesday and can provide investors with more clarity around future policy direction.

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