Daily Market Color

Rates Sell-Off Ahead of Jackson Hole

10-year U.S. Treasury yield hits two-week high, breaks above daily 200-day moving average

The 10-year U.S. Treasury yield increased 5 bps during trading to 1.35%, breaking its 200-day moving average and closing at its highest level since August 13th. The yield curve has steepened over the past couple days with the 2-year U.S. Treasury and 10-year U.S. Treasury yield spread increasing to 110 bps after starting the week at 102 bps. Tomorrow, the Fed’s Jackson Hole meeting kicks off with Chairman Powell scheduled to speak on Friday. Investors will also get another inflation reading before Powell’s remarks with the Core Personal Consumption Expenditure (PCE) index, the Fed’s primary gauge on inflation, being released at 8:30 EST.

Commercial Real Estate lending picking up steam at small banks

The Fed H8’s recent loan data release shows that CRE lending at small U.S. banks (all U.S. banks outside the top 25 in total assets) has picked up momentum in recent weeks. QTD growth for small bank CRE is currently 0.84%, at the current growth rate small banks will have their best quarter in 2021 in CRE lending. Offsetting CRE, C&I continues to be a drag for commercial lending as PPP loans continue to roll-off bank balance sheets.

July capital goods shipments beat estimates

Core capital goods shipments (excludes aircraft and military hardware) accelerated more than expected in July, increasing 1.0% month-over-month and beating analysts’ estimates of 0.7%. The better than expected shipments could offset a potential slowdown in consumer spending due to rising prices and COVID infections heading into the later part of 3Q. Further, capital good orders continued to be steady in July after June’s data was revised upward to 1.0% month-over-month growth.

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