Holbrook Insights

Treasury yields moved higher across the curve last week as equity markets rallied, and Federal Reserve (Fed) Chairman Jerome Powell reiterated that the central bank still plans on tapering asset purchases sooner rather than later. The 10-year yield picked up 6 basis points (bps) week-over-week to open Monday morning at 1.66 percent.

 

Global equity markets were up again last week as earnings drove the moves in stocks. Financials continued to rally following last week’s bank earnings and were further supported by the Fed’s ongoing discussion regarding potential upside inflation risks. Despite this, the Fed has continued to attempt to separate the difference between starting to taper asset purchases, which are expected to begin at the next meeting, and potential future rate hikes. 

 

The three major U.S. indices increased last week, driven by a temporary solution to the debt ceiling issue. The Dow Jones Industrial Average led the way and was supported by moves in energy, financial, and industrial sectors.

 

On Friday, the September employment report was released. The report showed that 194,000 jobs were added during the month, down from the upwardly revised 366,000 jobs that were added in August and well below economist estimates for 500,000 additional jobs. This marks two consecutive months with slowing job growth and represents the fewest jobs added in a month since last December. Part of the slowdown in September was due to a relative lack of local government education hiring, as the sector lost 144,000 jobs on a seasonally adjusted basis.

The Treasury yield curve steepened last week as investors weighed the possibility of longer-term elevated inflation. The 10-year yield was unchanged week-over-week, opening on Monday morning at around 1.48 percent. The 30-year yield rose about 5 basis points (bps) to open at 2.05 percent, while the 20-year yield gained 4 bps to around 1.98 percent.

 

Global equities were lower on the week with domestic growth and international among the hardest hit. A slew of factors led stocks downward, but the largest appeared to be the increase in bond yields, which hurt growth sectors such as health care and technology. The top-performing sectors were energy, financials, and materials. These sectors benefited from rising rates and potential longer-lasting inflation.

The Treasury yield curve climbed following last week’s Federal Reserve (Fed) meeting, during which the central bank indicated tapering asset purchases may be warranted before year-end. The 10-year yield was up 17 basis points (bps), opening at 1.48 percent on Monday morning. 

 

Domestic equities were slightly higher last week as the market shook off concerns surrounding the impact of Chinese real estate developer Evergrande and potential surprises from the Fed surrounding tapering. Equities began the week sharply lower as investors were concerned Evergrande’s default on its loans would yield a contagion effect across global financial markets for institutions with exposure to Chinese real estate.

The Treasury yield curve flattened on a week-over-week basis as markets sought safety early Monday, following a sharp sell-off in Asia and in anticipation of this week’s Federal Reserve (Fed) meeting.

 

Domestic indices were mostly lower last week as markets remained unsettled amid a noisy backdrop. Investors are hoping for clarity on a tapering timeline out of this week’s Fed meeting. Many believe tapering will begin before year-end, but economic data has been volatile recently. August’s Consumer Price Index (CPI) and retail sales reports were surprisingly positive, but sentiment remains dampened by a weak labor market. On the fiscal side, House Democrats will push to suspend the debt ceiling this week as an October deadline looms large. 

Treasury yields saw little movement last week as markets look for direction amid growth concerns and the coming September Federal Reserve (Fed) meeting. The 10-year yield was unchanged from last week, opening at 1.33 percent on Monday morning. 

 

Global markets were down as concerns about tighter monetary policies from central banks lead to re-evaluations of future global growth. We saw Fed officials talking about tapering later this year despite a significant miss on the August employment report (235,000 jobs added vs. 733,000 expected). We also saw the European Central Bank signal that it may moderate its Pandemic Emergency Purchase Programme pace (starting in the fourth quarter). 

The Treasury yield curve steepened modestly last week after Federal Reserve (Fed) Chairman Jerome Powell’s remarks at the Fed’s virtual annual symposium. The 10-year Treasury yield picked up 5 basis points (bps) week-over-week to open at about 1.3 percent on Monday morning. The 2-year fell about 1 bp to around 0.21 percent, the 5-year gained approximately 2 bps to 0.79 percent, and the 30-year was up 5 bps to 1.92 percent. After these muted moves, the markets are looking ahead to the August jobs report.

 

Monday saw the release of the July existing home sales report. Sales of existing homes came in above expectations, as sales increased 2 percent during the month against calls for a 0.5 percent decline. This better-than-expected result brought the pace of existing home sales to its highest level in four months.