Rates fall amid strong data, Fed commentary

Yields fall despite hawkish Fed speak. Swap rates and Treasury yields fell today across a steepening curve- the 2-year Treasury yield falling ~8 bps to 3.20% and the 10-year Treasury yield falling ~2 bps to 2.88%. The move came despite comments from Fed President James Bullard where he made it clear he’s in favor of a 75bp hike at the September FOMC meeting. On the other hand, Fed member Esther George struck a more dovish tone, advocating for a smaller 50bp rate hike. Fed Funds futures remain split on a 50 vs. 75bp rate hike in September.

Thursday economic data reveals a strong economy. The initial jobless claims report revealed healthier levels than expected, with the number of Americans filing new claims for unemployment benefits falling to 250,000, below the predicted level of 265,000. The Philadelphia Fed manufacturing index followed suit, rising to 6.2 in August from -12.3 in July, despite forecasts that expected data to come in at -6 for August. On the negative front, existing home sales in the U.S. declined to an adjusted annual rate of 4.81 million in July, the lowest since May of 2020 and below the median forecast of 4.89 million.

Day Ahead. Fed member Thomas Barkin will make public comments at 9:00 AM ET. Additionally, there will be a few data releases tomorrow, with data on e-commerce retail sales and oil rig counts set to be made public.