Equites rose nominally as bond yield yields fell ahead of a week that is full of economic data that may help shape the outlook of Federal Reserve policy. Equites breathed a sigh of relief that no new ground was broken last week at the Jackson Hole Symposium, with perhaps an unspoken belief that there may be no upside surprises in this week’s data.
Both the PCE or the Federal Reserve’s preferred measure of inflation, and August’s unemployment data are released at the end of the week. Trading staffs are expected to be thin leading into the three-day Labor Day weekend.
The logic holds, last week the Fed had already received the preliminary data and if the statistics varied significantly from consensus, Powell may have potentially fore warned the markets perhaps fearing an outsized response given the dearth of participants.
Thursday and Friday may validate this view.
Yesterday was the auction of the two- and five-year Treasury.
While market yields for existing two-year notes remain slightly below the multiyear high reached during the first week of July, the auction saw the highest yields since 2006.
This is a frightening statistic given that almost one third of our $33 trillion [and increasing] national debt needs to be rolled over in the next 12 months according to Bloomberg.
The debt debate has been around forever. When will it become an issue? It is perhaps now becoming too large to ignore given the deficit was approximately $4.9 trillion in 2006, the last time the two-year Treasury was at these levels.
What will happen today?
Last night the foreign markets were up. London was up 1.46%, Paris up 0.39% and Frankfurt up 0.46%. China was up 1.20%, Japan up 0.18% and Hang Seng up 1.95%. Futures are flat heading into the deluge of data. FRB Chair Powell has made it abundantly clear that monetary policy will be data dependent. The 10-year is up 1/32 to yield 4.21%.
