Rates Rise Again Amid “Triple Witching”

Today’s data overshadowed by major options event and UAW strike. Yields were generally up across the curve today, with the 2-year up ~2 bps to ~5.03%, and the 10-year up ~5 bps to ~4.33%. Driving market moves today was the “Triple Witching” event, where large volumes of stock options, index futures and index options all expired at the same time, and the historic UAW strike which also began today. Major equity indices were down ~0.80% – 1.60% on the day. 

Manufacturing strength continued while inflation expectations declined. Today’s slate of data releases included the Empire Manufacturing Index and MoM industrial production data which both exceeded expectations and signaled continued growth (1.9 vs. -10 est. and 0.4% vs. 0.1%, respectively). Aside from a ~5% decline in vehicle output, output increased 0.6%. Michigan consumer sentiment data was also released today, which showed that inflation expectations fell to the lowest level since early 2021, with consumers expecting inflation of 3.1% over the next year, down from 3.5% in August.

Oil prices rise for third-straight week. Prices for crude oil rose again this week, with WTI crude settling at ~$91 per barrel, as the International Energy Agency (IEA) and OPEC both warned this week that the market will face a supply-deficit through the end of 2023. Production cuts from Saudi Arabia and Russia continue to impact energy markets, and brighter U.S. economic outlooks combined with stronger-than-expected Chinese economic data today mean that demand could be strong, exacerbating the issue. Gas prices were a key driver of August inflation in the U.S. and further stress could impact efforts to curb inflation.