Daily Market Color

Treasury Yields Close Out August on a High Note

Rates end the month on a high note

After a choppy day of trading, Treasury yields and swap rates ended the day 1-4 bps higher across a steepening curve after Eurozone inflation jumped to a 10-year high — the UST yield 10-year closed 3 bps higher at 1.31%.  Major US equity indices ended the day in the red – the S&P 500 and DJIA fell 0.1%, while the Nasdaq declined 0.04%. Throughout August, however, the S&P 500 surged 2.9% — its largest monthly rise since April.

Consumer confidence dropped to a six-month low in August

The recent spike in COVID-19 cases and higher inflation levels dampened US consumer confidence, dragging the index down to 113.8 from 125.1 the month prior.  According to the report, only 19.9% (down from 24.6%) of consumers believe current business conditions are “good.”  The index also signaled consumers are less likely to purchase big ticket items like homes, autos, and major appliances within the next six months.

Eurozone inflation rises to its highest level in a decade

Consumer prices increased 3% Y/Y in August, compared to only a 2.2% Y/Y jump in July. The larger than anticipated rise was mostly attributed to the shortage in semiconductors and the rising costs that resulted, which have been mostly passed along to the customer. Similar to the Fed, ECB officials have labeled the spike as transitory and have thus far remained hesitant on scaling back the central bank’s asset purchase program. Markets will gain a deeper understanding of the Eurozone’s policy direction when the ECB meets again on September 9th.

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