Yields plunge on risk-off sentiment. Treasury yields dipped today as concerns over France and Italy’s fiscal deficit triggered a flight to safe-haven assets. Dovish comments from Fed officials Jefferson and Bowman also pushed yields lower, despite crude oil trading above $100 per barrel. The 2-year yield closed 10 bps lower at 4.79% and the 10-year yield 4 bps lower 5.24%. Meanwhile, equities inched higher, with the S&P 500 and NASDAQ closing 0.19% and 0.04% higher, respectively.
Jefferson, Bowman say more time is needed before further Fed action. Fed Vice Chair Jefferson said today that it “may take more time” for him and other Fed officials to determine whether further monetary policy adjustment is needed. He added that any “adjustments…should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks.” Jefferson said economic activity and the labor market are solid, but that elevated inflation has persisted for too long. Fed Vice Chair for Supervision Bowman echoed that view in her comments today, saying she does not “currently see an urgent need for further action.” Comments from a handful of Fed officials this week have pushed market expectations for a Fed hike in October below 30%, down from 70% earlier in the week.
Manufacturing growth remains expansionary, but pace slows. The September ISM ManufacturingPMI showed slight weakening from last month, coming in at 54.5, versus August’s 54.6 reading and expectations of 55.0. The index remained above the 50 threshold, marking the ninth consecutive month of expansion. New orders and employment both grew at a faster rate than in August, while order backlogs rose to their highest level since February. The prices index climbed to 77.9 from 71.1 in August, driven by increasing steel and aluminum costs, along with rising prices for petroleum-based products as the war in Iran continues. Chris Williamson, Chief Business Economist at S&P Global, noted, “The combination of accelerating growth, increased hiring and elevated price gauges will add to speculation of a further imminent rate hike from the FOMC.”
