Rates Rise on Strong Manufacturing Data

Rates climb and equities reverse losses as manufacturing activity data tempers pessimism. Swap rates and Treasury yields grinded higher across a steepening curve a day after disappointing CPI figure pulled rates to multiweek lows. Rates, along with equities and other risk assets, were helped higher by resilient manufacturing data and rising crude prices. The 10-year Treasury yield would ultimately climb 1.5 basis points on the day to close at 1.299% while US equities rose the most in several weeks- the S&P 500 gaining 0.85%.

New York manufacturing activity trumped expectations in September. The New York Fed’s Empire State Manufacturing index, which measures general business conditions in the state, increased to 34.3 in September, up from 18.3 in August and well above economist expectations of 17.9. A reading above zero indicates growth. Orders and shipments rebounded strongly during the month after a sharp decline in August, while prices received hit a new record high during the month, increasing 1.8 points to 47.8.

Increasing housing rents are starting to show in consumer inflation data. Tuesday’s consumer price index data shows that higher rent prices, up from the pandemic lows, are starting to show in CPI with August seeing the highest increase since March 2020. Rent and lease data out of New York City shows some neighborhoods are seeing rent increases upwards of 70% from the prior year. The hot housing and rent market could continue to keep CPI elevated from historical levels, even as prices on other goods and services start to stabilize.