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Bob Carey
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  US Economy and Credit Markets Ended August 5, 2022
Posted Under: Weekly Market Commentary
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U.S. Treasury yields rose significantly over the course of the week, especially short-term yields, as investors weighed the pace at which the Federal Reserve would increase interest rates at coming meetings. Yields started the week with a drop in rates on Monday, before rising significantly on Tuesday as regional Fed policy makers Mary Daly and Charles Evans said that U.S. interest rates need to keep rising until inflation comes back down. Long-term yields then dropped moderately again on Wednesday as the ISM manufacturing index rose to a 3-month high of 56.7, compared to estimates of 55.3. Yields remained flat on Thursday as the Bank of England increased their target interest rate to by 50 basis points to 1.75 and U.S. Jobless claims met expectations of 260k. On Friday, yields rose significantly again across all durations as the U.S. added 528k jobs in July, which was significantly higher than expectations of 250k. This led investors to speculate that the Fed may increase the Federal Funds Target Rate more rapidly. The market implied probability of a 75-basis-point increase at the September 21st meeting rose from 32% at the beginning of the week to 76% by the end of the week. The yield curve continued to invert as the 2-year yield ended the week 40 basis points higher than the 10-year yield. Oil prices dropped 10% over the course of the week as recession fears have led investors to speculate there will be reduced demand for oil. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Wednesday: August 5 MBA Mortgage Applications (n/a, 1.2%), July CPI MoM (0.2%, 1.3%), July CPI YoY (8.7%, 9.1%); Thursday: August 6 Initial Jobless Claims (265k, 260k), July PPI Final Demand MoM (0.3%, 1.1%), July PPI Final Demand YoY (10.4%, 11.3%); August Prelim. U. of Mich. Sentiment (52.0, 51.5).

Posted on Monday, August 8, 2022 @ 8:20 AM • Post Link Share: 
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