Data-Dependency Remains The Name of The Game

2-year UST yield back below 5%. Swap rates and UST yields grinded lower today after Fed members offered relatively neutral thoughts on monetary policy. Initial jobless claims drove an intraday selloff, with the 2-year climbing to 5.03%, but rates fell significantly thereafter with the 2-year ending at 4.95%. The 10-year UST yield closed 4bps lower at 4.24%.

Labor market shows resiliency after unemployment rate spike. Initial jobless claims decreased by 13k to 216k in the week that ended September 2nd, the lowest figure since February. Though last week’s unemployment rate jump to 3.8% and a downward NFP revision illustrated a softening labor market, today’s data signaled tightness. Meanwhile, continuing claims dropped to 1.68 million, which before July was a low since January.

Fed speakers send neutral messages today. Markets reacted to Fedspeak today that emphasized a “wait and see” attitude. NY Fed President Williams said that he feels policy is “in a good place,” and is having an impact on easing inflation, but reemphasized the need for data-dependency before the Fed decides on next steps. Chicago Fed President Goolsbee also spoke today, highlighting that internal debates at the Fed are increasingly focused on how long rates should be held high rather than how high they should go, another theme in recent months. Still, he called out persistent core and service inflation, saying “we want to see progress on those. And we have started to see that.”