Curve Steepens on Bostic Taper Comments

Rates rise for the fourth consecutive trading session

Bonds extended their sell-off today after markets received hawkish comments from two more Fed members. Richmond Fed President Tom Barkin and Atlanta Fed President Raphael Bostic both noted the “substantial progress” displayed in recent economic data and guided that a taper of the Fed’s bond purchasing program could start in 4Q 2021. Consistent across both speeches were the themes that 1) inflation was near or already at the Fed’s target and 2) there remains a bit of slack within labor markets.

After rallying to start the day, rates reversed following the words from Barkin and Bostic, with the 10yr UST yield closing near a 3-week high of 1.32%.

Job openings hit record high as employers struggle to hire

On the positive side, the labor market continued to add jobs at a record pace as the service economy gets back to pre-pandemic levels. June job openings hit a record high with over 10 million vacancies. However, increasing COVID cases, stimulus benefits, and child care obligations have provided roadblocks in hiring.

Inflation data on deck this week

This week will give continued insight to the Fed’s next policy move with more Fed Presidents slated to speak. On Wednesday and Thursday, July CPI and PPI data will be released. Analysts are expecting core CPI to increase 4.3% YoY and YoY core PPI to print at 5.6% – both figures well above the Fed’s 2% threshold.