Prior Week Summary
Last week saw a number of important data releases come and go with relatively little market volatility. While the yield on the benchmark 10-year Treasury Note rose above 3% mid-week to coincide with the FOMC meeting announcement, it quickly retraced that move to end the week two basis points lower than where it began after the release of the July employment report. The Labor Department reported that payrolls advanced 157,000 in July after gaining an upwardly revised 248,000 in June. The positive revision to the June data helped the market absorb the less-than-anticipated growth in July hiring. Manufacturing payrolls were one of the largest beneficiaries of hiring in July, as the sector added nearly 40,000 jobs in the period.
In other economic news, the FOMC left the fed funds target ranges unchanged at a level of 1.75-2.00%, in a unanimous decision, as was widely anticipated. The statement associated with the meeting guided markets to expect continued tightening, stating that the “Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.”
As of this writing, the market is still largely expecting a hike at the September meeting with roughly 94% odds priced in for a 25 basis point hike.
The Look Forward
The data calendar this week is skewed toward inflation dynamics with consumer and produce price updates expected on Thursday and Friday.
Sources: Bloomberg Finance L.P., (Treasuries) Chatham Financial (Swap Curves), FHLB Boston, Chicago, Dallas, Des Moines for FHLB Advance Rates. Wells Fargo Brokered CD Indications.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Source: Chatham Financial
Fixed Income Snapshot
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