Yields climb as US-Iran tensions remain heightened. Treasury yields rose across the curve today as strikes between the US and Iran continued, driving WTI crude up nearly 6% to surpass $90 per barrel. The 2-year yield closed 6 bps higher at 4.40%, and the 10-year yield closed 5 bps higher at 4.80%. Meanwhile, equities fell as markets shifted risk-off due to the geopolitical headlines, with the S&P 500 and NASDAQ closing 0.71% and 1.03% lower, respectively.
Fed’s Barr offers hawkish comments ahead of FOMC meeting. Fed Governor Michael Barr struck a data-dependent tone today, saying the Fed should be prepared to act but that softer inflation readings could allow for patience. Barr said “if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates,” but added that “if trends in the data give…confidence that inflation is moderating on a path to 2%, then…we can take a bit more time to assess our policy stance.” Barr’s comments follow Fed Chair Kevin Warsh’s hawkish remarks at last week’s Jackson Hole Symposium, where he said inflation needs to be brought back down to the Fed’s target. Markets are now pricing in a 68% chance of a rate hike at the September 15–16 FOMC meeting.
Manufacturing activity expands for eighth consecutive month. The ISM manufacturing activity index came in at 54.6, a one-point decline from July, but still the second-highest print since 2022 and the eighth straight month of expansion. Fifteen manufacturing industries posted growth, while wood and chemical products saw contraction. Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, cited the ongoing Iran war and tariff policies as two major concerns for manufacturing, which has so far seen momentum this year. Spence said, “I’m starting to see warning signs, and frankly, I probably wouldn’t feel that way if the new order drop and the backlog drop were slight.” The new orders gauge fell to 53.7 in August from 56.7 the prior month, the lowest level since March, but still in expansionary territory.
