Yields climb as services data surpasses expectations. Treasury yields edged up today on the back of stronger-than-expected business activity data released this morning. Market attention now turns to next week’s expected updates on the US Treasury buyback plans and economic isolation measures against Iran.The 2-year yield closed 5 bps higher at 4.24% (up 7 bps on the week), while the 10-year yield closed 3 bps higher at 4.73% (up 4 bps on the week). Meanwhile, equities rallied on the positive data, with the S&P 500 and NASDAQ both up 0.43%.
US services PMI surges in August. The US composite PMI landed at 56.0 for August’s preliminary reading, up from 54.5 in July. Today’s data highlighted a slight dip in manufacturing output that was offset by a surge in the services sector as the manufacturing PMI came in at 53.2, below last month’s 53.9 reading. Meanwhile, the services sector rose to 56.8, matching the highest print since December 2024, exceeding expectations of 54.0 and rising from 54.6 in July. Chris Williamson, chief business economist at S&P Global Market Intelligence, expanded on this data, saying, “The survey data for the third quarter are currently pointing to annualized growth approaching 3.0%, up solidly from the 1.5% pace seen in the second quarter.”
Trump’s economic threats draw pushback from China. Following President Trump’s threats this week for an “economic D-Day” against Iran and its allies, focus has turned to China. Beijing, which buys roughly 90% of Iranian petroleum exports, pushed back on Trump’s threats, saying sanctions would not “fit the interest of any party.” The US has imposed sanctions on a handful of Chinese refineries since the start of the conflict, but largely avoided broader economic consequences for China’s support of Iran. Chris Kennedy at Bloomberg Economics questioned whether “the White House is willing to prioritize this new economic warfare campaign above its China relationship.” The escalating tensions come ahead of Chinese President Xi’s visit to Washington next month, his first in over a decade.