Written by Sarah Conwell, Portfolio Manager
Headlines of the Week
- Biden signs temporary funding bill to prevent government shutdown
- Sen. Warren calls Fed Chair Powell a ‘dangerous man,’ says she will oppose his renomination
- China Hidden Local Government Debt Is Half of GDP, Goldman Says
- Two Fed officials depart amid scrutiny over investment trades
The US Treasury yield curve bear steepened in the week, the second week in a row long rates have increased at a faster pace than their shorter counterparts. It is also worth noting that Treasury Bills on the very short end of the curve (i.e. 1 month) have increased 4 basis points in the week, as the debt ceiling decision looms in Congress. You can see this movement in this week’s Chart of the Week, circled in red.
On Monday, Durable Goods Orders for August were released and were shown to have increased 1.8%. Along with the strong headline print, July’s figure was also revised a healthy 0.6 percentage points higher to 0.5% from -0.1%. Although analysts question potential adverse impacts on service spending resulting from the Delta variant, it appears as though business investment is not being impacted to the same extent.
On Thursday, the third estimate of second quarter GDP was released and was little changed at 6.7%, from 6.6%. Estimates for Q2 Personal Consumption were increased slightly to 12.0% in the same release. In this morning’s slate of economic releases, Personal Income and Spending were close to their consensus estimates, at 0.2% and 0.7% respectively. The PCE Deflator increased 0.4% in the month on a headline basis and 0.3% on a core basis. This brings the total year-over-year to change in prices to 4.3% and 3.6% on a headline and core basis. Although these levels are elevated in recent historical context, monthly price increases have begun to settle from the higher rates seen at the beginning of the year. It will take some time for bottlenecks to work their way through the system and allow prices to increase at a lower, normal pace. Realistically, this may take years.
Next week, the main releases are labor-market related with ADP Employment, Nonfarm Payrolls, the Unemployment Rate, and the Labor Force Participation Rate all on tap.
Chart of the Week
Indexes used for AAA Municipal Yields
2 Year: BVAL Municipal AAA Yield Curve (Callable) 2 Year (Symbol: CAAA02YR BVLI)
5 Year: BVAL Municipal AAA Yield Curve (Callable) 5 Year (Symbol: CAAA04YR BVLI)
10 Year: BVAL Municipal AAA Yield Curve (Callable) 10 Year (Symbol: CAAA10YR BVLI)
30 Year: BVAL Municipal AAA Yield Curve (Callable) 30 Year (Symbol: CAAA30YR BVLI)
Indexes used for US Treasury Yields
2 Year: US Generic Govt 2 Year Yield (Symbol: USGG2YR)
5 Year: US Generic Govt 5 Year Yield (Symbol: USGG5YR)
10 Year: US Generic Govt 10 Year Yield (Symbol: USGG10YR)
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